2. Suppose citizens living around Metropolitan Airport value peace and quiet at a value of$3 billion.

a. b.

c. d.

e. f. If it costs the airlines $4 billion to make their planes quieter (the airlines value noise at $4 billion), is it effi~ient for the government to require that the planes be muffled? Why or why. not? If it costs the airlines $2 billion to make their planes quieter, is it efficient for the govermnent to require that the planes be muffled? Why or why not? --------------------------_... _-- Suppose there are no transaction costs and suppose that people have the right to peace and quiet. If it costs the airlines $2 billion to make their planes quieter, what is the private solution to the problem? Suppose there are no transaction costs and suppose that airlines have the right to make as much noise as they please. If it costs the airlines $2 billion to make their planes quieter, what is the private solution to the problem? -----...-~-. ~---~ --------- Compare your answers to c and d above. What are the similarities, and what are the differences? What general rule can you make from the comparison? Suppose it costs the airlines $2 billion to make their planes quieter. Ifa private solution to the noise problem requires an additional billion oftransaction costs (due to legal the large number ofaffected parties, and enforcement costs), can there be a private solution to the problem? Why or why not?