1. Tom and Larry must spend a day working together. Tom likes to smoke cigars and the price of a cigar is $2. Larry likes a smoke-free environment. If Tom’s marginal benefit from a cigar a day is $20 and Larry’s marginal benefit from a smoke-free environment is $25 a day, what is the outcome if they meet at Tom’s home? What is the outcome if they meet at Larry’s home?

2. If Tom’s marginal benefit from a cigar a day is $25 and Larry’s marginal benefit from a smoke-free environment is $20 a day, what is the outcome if they meet at Tom’s home? What is the outcome if they meet at Larry’s home?