Purchase Solution

Total Costs Determinations

Not what you're looking for?

Ask Custom Question

Smith can operate his saw mill with or without soundproofing. Operation without soundproofing results in noise damage to his neighbor Jones. The relevant gains and loses for Smith and Jones are listed in the table:

Without soundproofing
With soundproofing

Gains to Smith...........................$150/week
$34/week

Damages To Jones.....................$125/week
$6/week

a. If Smith is not liable for noise damage and there are no negotiation costs, will he install sunproofing? Explain.....
b. How, if at all, would your answer differ if the negotiation costs of maintaining an agreement were $4/week? Explain.....
c. Now suppose Jones can escape the noise damage by moving to
a new location, which will cost him $120/week. With negotiation costs again assumed to be zero, how, if at all, will your answer to part (a) differ? Explain.....

Purchase this Solution
Solution Summary

Total Costs Determinations are achieved. The relevant gains and loses for Smith and Jones are examined. Soundproofing operating gains are analyzed.

Solution Preview

a. If Smith is not liable for noise damage and there are no negotiation costs, will he install soundproofing? Explain.....
Negotiation costs = 0
The cost of soundproofing for Smith = 150-34 = $116 per week
Benefits of soundproofing to Jones = 125-6=$119 per week
Cost of soundproofing to Smith ($116 per week) is less than benefits to Jones ($119) and there are no negotiation costs. There is a net benefit of $3 per week for installing the soundproofing. Both can negotiate to split the net benefit in any manner ...

Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

View More Free Quizzes
Related BrainMass Solutions

  • coefficient of determinations and correlation coefficient

    i) It means that 98.2% of the total variation in y can be explained by the linear relationship between x and y (as described by the regression equation). The other 1.8% of the total variation in y remains unexplained.

  • Simple linear regression questions

    In a simple linear regression, the coefficient of determinations is the amount of unexplained variation divided by the total variation. 2.

  • Keltner Inc: Accounting Change and Error Analysis; prepare journal entries

    In 2008, the decision was made to shorten the total life of this asset to 9 years and to estimate the salvage value at $3,000. 3. Depreciable asset C was purchased January 5, 2004.

  • Market Determinations for Payments

    The solution answers the question(s) below about market determinations for payments.

  • workforce reduction

    Practically, the threat of a lawsuit and the costs of litigation are often high even when a case has no merit.

  • Supply Chain Managment

    Total number of personnel hours, (3.) Indirect costs determinations such as warehouse, transportation, taxes and fees), (4.) Cost of resources (raw materials and machine time) and (5.) Evaluate necessary and reasonable costs.

  • Madrasa Inc: Entries for Three Depreciable Assets

    On December 31, 2010, before the books were closed, the management and accountants of Madrasa Inc. made the following determinations about three depreciable assets. (a) Prepare all necessary entries in 2010 to record these determinations.

  • Cancer Screening

    Do you object to mandatory determinations by government on the distribution of vaccines, regulation of air and water pollution or should the free market ensure equitable distribution of resources?

  • Accounting Change and Error Analysis

    In 2008, the decision was made to shorten the total life of this asset to 9 years and to estimate the salvage value at $3,000. Depreciable asset C was purchased January 5, 2004.

View More Related Solutions