Question $7(5$ points$)$

A confectioner needs to use a noisy machine in the process of making his sweets. The noise disrupts his neighbor, a doctor, who needs quiet time to provide medical services to his patients. The following describes the confectioner's marginal benefits of producing noise, $\backslash ($ M B$\_\{$C$\}\backslash ),$ and the marginal cost of noise to the doctor, $\backslash ($ M C$\_\{$D$\}\backslash ).$

$\backslash [$

$\backslash$begin$\{$array$\}\{$c$\}$

M B$\_\{$C$\}=12-$N $\backslash \backslash$

M C$\_\{$D$\}=7$

$\backslash$end$\{$array$\}$

$\backslash ]$

Suppose the doctor has the right to quiet time and the noise level is currently at $\backslash ($ N$=\backslash )2.$

Assuming there are no transaction costs, what is the amount of noise that results from the confectioner bargaining with the doctor? What are the net benefits realized from this bargaining?

Bargaining results in noise level that equals $7$ and net benefits that equal $4\mathrm{.}5.$

Bargaining results in noise level that equals $3$ and net benefits that equal $4\mathrm{.}5.$

Bargaining results in noise level that equals $3$ and net benefits that equal $0\mathrm{.}5.$

Bargaining results in noise level that equals $5$ and net benefits that equal $12\mathrm{.}5.$

Bargaining results in noise level that equals $5$ and net benefits that equal $4\mathrm{.}5.$