3. Yeezy's Shoe Product (20 pts) Kanye owns Yeezy, a sneaker company, and production of the shoes is noisy. The noise disturbs Kanye's neighbor Taylor. The value of Yeezy (the present discounted value of its future profits) is $1,000,000. Manufacturing the sneakers without making noise would be much more costly - if Kanye were forced to run his factory silently (if ordered by the court, we can call it an "injunction"), the value of Yeezy would fall to $400,000. We can estimate that the harm (i.e. cost) done to Taylor (having to endure the noise), now and in the future, is valued at $100,000. (a) What is the efficient outcome - for Yeezy to shut down, to run silently, or to run noisily? Prove your answer using the information above. (b) Suppose Taylor is granted a court order to stop Yeezy from making noise (again, called an injunction). Thus, Taylor has the property right. i. If Taylor enforced the injunction, Kanye would have to run Yeezy's factory silently. What would be Kanye's and Taylor's payoffs each (i.e. total net profit/utility/benefit)? (Think about how much each party now has in profit/utility after enforcement of the injunction.) ii. Assume Taylor still has the property right. Assume Kanye and Taylor try to negotiate to a deal under which Taylor would not enforce the injunction. What would be the total net gains (i.e. Kanye + Taylor) from cooperation through bargaining as compared to if Taylor just enforces the injunction? (Think about the net gains to each if the injunction isn't enforced.) iii. If the gains from cooperation were split evenly between the two parties, what would each party's payoff (net benefit) be? How much would Kanye be paying Taylor not to enforce the injunction? (c) Suppose instead that Kayne were required to pay Taylor permanent damages if Yeezy wanted to continue making noise. So Taylor still has the property right, but instead of an injunction, Kanye would pay damages (one time). What would Kanye choose to do? What would be Kanye's and Taylor's payoffs?(d) What does the Coase Theorem say about the two remedies (injunction or damages) when Taylor has the property right and there are no transaction costs? (e) We know Kanye and TayTay have beef. Would the efficient outcome result if we take this into account? Be clear and complete in your "proof of your