Question
Assume Andy's and Helen's behavior at home is partially regulated by their condominium association, which acts as a small voluntary government for its residents. Per
Assume Andy's and Helen's behavior at home is partially regulated by their condominium association, which acts as a small "voluntary government" for its residents. Per the Coase Theorem, how might the condominium association assign property rights across Andy and Helen so that a socially optimal level of radio playing is realized? Please explain how a particular assignment of rights would work towards achieving this goal. Your answer from above should say something about the market for externalities that arises after an assignment of property rights. Use this answer's logic, along with the information provided in the questions above, to model the market for externalities. How many hours of externalities are traded in this market when at equilibrium? Is the quantity socially optimal? Please provide a graph with your answer. 5pt Instead of assigning property rights, could the association use corrective "taxes" or "subsidies" to achieve a socially optimal level of radio playing? Explain.
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