1. Your neighbor Gabriella plays loud music that irritates you and the rest of her neighbors. She agrees to turn down the music by 5 decibels for every $25 she receives from her neighbors, and even though you and your neighbors collectively value reductions of 5 decibels at more than $25 per person, no one pays. This is an example of what type of problem?

a. the transaction costs and negotiating problem she holdout problem                    

b. the assignment problem                       

c. the free-rider problem                           

d. the externality-internalization problem                           

e. the transaction costs and negotiating problem

2. Suppose that a market is currently in equilibrium and that there is no government intervention in the market. If the private marginal cost of producing the item is $4 and the social marginal cost of production is equal to $6, then what is the private marginal benefit of the item?                   

A. $2                      b. $4                     c. $10                    d. $6                     e. $0