The lease on Allison's apartment will expire next month, and she wants to move closer to campus. There are two apartments that she likes. Both are close to campus and in her price range. The first one is next door to a garage where local bands often practice late at night. The second one is next door to a donut shop that opens at 5 a. m.If she likes to stay up late and loves listening to all kinds of music, she will view the bands practicing as a(n).a. price floor. b. external benefit. c. willingness to pay. d. external cost. e. private good. If she is a morning person and loves the smell of donuts, she will view the donut shop as a(n).a. external benefit. b. willingness to pay. c. external cost. d. price ceiling. e. private good. If her roommate hates loud music and the smell of donuts makes her sick, she will reject both apartments due to what she sees asan external cost. a. a private good. b. asymmetric information. c. an external benefit. d. a price floor.

The correct answers are:

B. External Benefit.

A. External Benefit.

External Cost.

Explanation:

First, we will define the terms External Benefit and External Cost and compare the definitions with the scenarios above.

External benefit is a situation in which an activity or transaction has a positive impact or benefit on a party that is not part of the activity or transaction. This means that the activity or transaction offers a benefit to a party that has no say in the activity.

External Cost is the direct opposite of External Benefit, in that External Cost has a negative impact or cost on a party that is not part of an activity or transaction.

Comparing the definitions to the scenarios above, we can see that the apartment next door to a garage where local bands practice offers an External Benefit to Allison, if she loves staying late and listening to music. In this case, we can see that she has no part in the activity, but benefits from it.

Also, the apartment next door to a donut shop that opens at 5am will offer an External benefit to Allison, if she wakes up early and loves the smell of donuts. In this case, we see that Allison does not partake in the making of the donuts in the donut shop next door, but she benefits from the activity.

However, if Allison's roommate hates loud music and the smell of donuts makes her sick, she will reject both apartment because of External Cost they both offer to her.

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