2. (50 points) A and B are two households that are nextrdoor neighbors. A enjoys listening to music, played very loud. B prefers quiet. Each household's monthly income is $3,000. Using :1: to denote the volume of A's music in tens of decibels, and using 11,; and ya to denote their monthly consumption of other goods [in dollar's worth), the preferences of households A and B are described by the following utility functions: 1 Hall': LIA) = 31.4 + 911? 51172 Helm: ya) = ys 172 (a) (25 points) Suppose there is no law restricting the volume at which people can play music; thus, A has the right to play their music at whatever volume they like. According to |Coase's argument, the two familial will reach an agreement about the volume of the music, and one household will pay some monetary oompensation to the other. According to Coase's argument, what volume of music will the households agree upon? lWhich family will receive compensation? [b) (25 points) Determine the Lindahl equilibrium, that is the music volume and the amount of money that one family transfers to the other, again assuming that there is no law restricting the volume of music