3. (Note: This is a variation of problem 6 of chapter 16 in your textbook.) Kenya andDionne live on adjacent plots of land. Each has two potential uses for their land,the present values of each of which depend on the use adopted by the other, assummarized in the table. All the values in the table are known to both parties.DionneRental housingBee keepingKenyaApplegrowingA: $200B: $700A: $400B: $650PigfarmingA: $450B: $400A: $450B: $500a. What is the efficient outcome?b. If there are negotiation costs of $150, what activities will the twopursue on their land?c. If there are no negotiation costs and the two negotiate, what activitieswill the two pursue on their land? How might a benevolent planner helpreduce the costs of negotiating to encourage the optimal combinationof land uses?

In this scenario, Kenya and Dionne have adjacent plots of land with different potential uses, and…

Answered: a. What is the efficient outcome? b. If…

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