Answered: 1 band No bands 2 bands 3 bands 200 Bar…

Business

Economics

1 band No bands 2 bands 3 bands 200 Bar owner 0 100 300 benefits 125 Tenants costs 0 75 400

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 1.1CE

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Question

There is a bar on Off‐Main Street called the Rock‐n‐Roll Bar. All the people that go to that bar like to listen to rock‐n‐roll music, and they love live bands. If the bar owner brings bands in to play music on a Saturday night, she will make a lot of money. However there are tenants in this building who get annoyed by the loud music. The benefits/costs to the owner/tenants of having zero, one, two or three bands on a Saturday night are listed in the attached table.

If the tenants have the right to be free of loud music enforced through a property rule, how many bands will play in Rock‐n‐Roll Bar on a Saturday night?

A. Zero

B. One

C. Two

D. Three

E. It depends on transaction costs

1 band
No bands
2 bands
3 bands
200
Bar owner
0
100
300
benefits
125
Tenants costs
0
75
400

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