1. Imagine that you are a nonsmoker sharing a room with a smoker. According to the Coase theorem, what determines whether your roommate smokes in the room? Is this outcome efficient? How do you and your roommate reach this solution?/2

b) Even if the externality issue is resolved using a private solution (Coase), can you think of other issues or problems that would stem from the situation? (For example, how do you determine to whom to give rights?)