Refer to Figure 16.4. Suppose the government assigns property rights to the airlines, then the airlines and the residents engage in negotiations. The resulting efficient level of air travel is

A) 0 units.
B) 100 units.
C) 120 units.
D) indeterminate from the given information.

When property rights are assigned to the airlines and they engage in negotiations with the residents, the Coase theorem suggests that the parties will negotiate to reach an efficient outcome regardless of the initial allocation of rights, as long as transaction costs are low. The efficient level of air travel would be at a point where the marginal benefit to the airlines equals the marginal cost to the residents, which, based on the premise of the question, is suggested to be 100 units.