A farmer’s fields are right next to the train tracks, where sparks from the trains set the field on fire. The railroad profit from running zero, one, two or three trains is shown below. The columns indicate the number of trains running. Total railroad profits are the total profits to the railroad from running the specified number of trains. Total lost farmer profits are total profits the farmer loses from a specified number of trains running. Trains 0 1 2 3 Total Railroad Profit. $200 $300 $350 $410 Total Lost Profit for Farmer $0 $100 $125 $300 1) If a court grants the railroad the property right throw sparks, and transaction costs are $1400 (split evenly by the Railroad and the Farmer, so that each has $70 in transaction costs), how many trains will run? a) 0 b) 1 c) 2 d) 3 e) Not enough information 2) If a court grants the railroad the property right to throw sparks, and transaction costs are $40 (split evenly by the Railroad and the Farmer, so that each has $20 in transaction costs), how many trains will run? a) 0 b) 1 c) 2 d) 3 e) Not enough information 3) If a court grants farmers the property right to be free of sparks and transaction costs are $80 (split evenly by the Railroad and the Farmer), how many trains will run? a) 0 b) 1 c) 2 d) 3 e) Not enough information
A farmer’s fields are right next to the train tracks, where sparks from the trains set the field on fire. The railroad profit from running zero, one, two or three trains is shown below. The columns indicate the number of trains running. Total railroad profits are the total profits to the railroad from running the specified number of trains. Total lost farmer profits are total profits the farmer loses from a specified number of trains running.
Trains
0 1 2 3
Total Railroad Profit. $200 $300 $350 $410
Total Lost Profit for Farmer $0 $100 $125 $300
1) If a court grants the railroad the property right throw sparks, and transaction costs are $1400 (split evenly by the Railroad and the Farmer, so that each has $70 in transaction costs), how many trains will run?
a) 0 b) 1 c) 2 d) 3 e) Not enough information
2) If a court grants the railroad the property right to throw sparks, and transaction costs are $40 (split evenly by the Railroad and the Farmer, so that each has $20 in transaction costs), how many trains will run?
a) 0 b) 1 c) 2 d) 3 e) Not enough information
3) If a court grants farmers the property right to be free of sparks and transaction costs are $80 (split evenly by the Railroad and the Farmer), how many trains will run?
a) 0 b) 1 c) 2 d) 3 e) Not enough information
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