Problem 3. Company X's factory makes noise that would cost $6000 to quieten. The noise causes company Y next door to lose $8000 in productivity and it would cost company Y $7700 to install noise-proofing that would shut out the noise. Transactions costs are high. a) True or False? Under no liability, Company Y will install the noise-proofing. b) True or False? Under strict liability, Company X will pay to prevent the noise. c) What is the efficient solution to the noise problem (should it be quietened and by who)?

Problem 3. Company X's factory makes noise that would cost $6000 to quieten. The noise causes company Y next door to lose $8000 in productivity and it would cost company Y $7700 to install noise-proofing that would shut out the noise. Transactions costs are high. a) True or False? Under no liability, Company Y will install the noise-proofing. b) True or False? Under strict liability, Company X will pay to prevent the noise. c) What is the efficient solution to the noise problem (should it be quietened and by who)?

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 38P

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