McCammon and Mr. Bean are neighbors. Ms. McCammon hasn't painted her house in years. Mr. Bean wants to sell his house and retire to Florida. Bean can sell his house for $10,000 more if McCammon paints her house because the neighborhood will look more attractive to prospective buyers. Assume the total cost of having a house painted is $1,000 and that McCammon herself derives no benefit from having her house painted. Also assume that Ms. McCammon has the property rights to her house; McCammon is the one to decide whether her house is painted. a. State the Coase Theorem. b. What is the efficient market outcome? That is, should McCammon have her house painted? c. What is the maximum amount that Bean be willing to pay McCammon to have her paint her house? d. What is the minimum amount that McCammon must be paid in order for her to be willing to paint her house
McCammon and Mr. Bean are neighbors. Ms. McCammon hasn't painted her house in years. Mr. Bean wants to sell his house and retire to Florida. Bean can sell his house for $10,000 more if McCammon paints her house because the neighborhood will look more attractive to prospective buyers. Assume the total cost of having a house painted is $1,000 and that McCammon herself derives no benefit from having her house painted. Also assume that Ms. McCammon has the property rights to her house; McCammon is the one to decide whether her house is painted.
a. State the Coase Theorem.
b. What is the
c. What is the maximum amount that Bean be willing to pay McCammon to have her paint her house?
d. What is the minimum amount that McCammon must be paid in order for her to be willing to paint her house
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