Question
Curly and Moe are considering living alone or being roommates and splitting the rent for the next twelve months. If they live alone, they each
Curly and Moe are considering living alone or being roommates and splitting the rent for the next twelve months. If they live alone, they each rent a one bedroom, one bath apartment for $500 per month, while if they are roommates, they can split a two-bedroom, one bath apartment for $800 per month. The one difficulty they have is that Moe snores very loudly. Curly estimates the cost of poor sleep due to Moe's snoring at $30 per month. Moe could obtain a snore-eliminating device for $50 per month. What will be the efficient solution to this externality problem? How much would each of them be paying in rent per month? Explain carefully.
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