One way that damage can be reduced is for either the farmer or the rancher to install a fence. The farmer could build and maintain a fence that would keep out the cattle for an annual cost of $80. The cattle rancher could build and maintain a fence between the properties that would keep his cattle out of the farm for an annual cost of $60. If there is no fence, then marauding cattle will reduce the farmer's profit from grain-growing by $70 per year. Assume that the costs of bargaining between the farmer and the rancher are zero. This also implies costless litigation. If we are operating under Farmer's rights: Would the farmer build a fence? Would the rancher build a fence? What if we are operating under Rancher's rights: Would the farmer build a fence? Would the rancher build a fence? Reminder of definitions. Farmers' rights: if a farmer suffers damage from cattle wondering on to his property, he is entitled to be compensated for that damage--in other words, the rancher is responsible to keep his cattle off the farmer's property and if the cattle cause damage by trespassing, the rancher is liable for the damage they cause Ranchers' rights: cattle ranchers have no legal duty to supervise their cattle and so if their cattle cause damage to someone else's property, the ranchers are not liable to provide compensation to the injured farmer
One way that damage can be reduced is for either the farmer or the rancher to install a fence. The farmer could build and maintain a fence that would keep out the cattle for an annual cost of $80. The cattle rancher could build and maintain a fence between the properties that would keep his cattle out of the farm for an annual cost of $60. If there is no fence, then marauding cattle will reduce the farmer's profit from grain-growing by $70 per year. Assume that the costs of bargaining between the farmer and the rancher are zero. This also implies costless litigation. If we are operating under Farmer's rights: Would the farmer build a fence? Would the rancher build a fence? What if we are operating under Rancher's rights: Would the farmer build a fence? Would the rancher build a fence? Reminder of definitions. Farmers' rights: if a farmer suffers damage from cattle wondering on to his property, he is entitled to be compensated for that damage--in other words, the rancher is responsible to keep his cattle off the farmer's property and if the cattle cause damage by trespassing, the rancher is liable for the damage they cause Ranchers' rights: cattle ranchers have no legal duty to supervise their cattle and so if their cattle cause damage to someone else's property, the ranchers are not liable to provide compensation to the injured farmer
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:One way that damage can be reduced is for either the farmer or the rancher to install a fence.
The farmer could build and maintain a fence that would keep out the cattle for an annual cost of $80.
The cattle rancher could build and maintain a fence between the properties that would keep his cattle out of the farm for an annual cost of $60.
If there is no fence, then marauding cattle will reduce the farmer's profit from grain-growing by $70 per year.
Assume that the costs of bargaining between the farmer and the rancher are zero. This also implies costless litigation.
If we are operating under Farmer's rights:
Would the farmer build a fence?
Would the rancher build a fence?
What if we are operating under Rancher's rights:
Would the farmer build a fence?
Would the rancher build a fence?
Reminder of definitions...
Farmers' rights: if a farmer suffers damage from cattle wondering on to his property, he is entitled to be compensated for that damage--in other words, the rancher is responsible to keep his cattle off the farmer's property and if the cattle cause damage by trespassing, the rancher is liable for the
damage they cause
Ranchers' rights: cattle ranchers have no legal duty to supervise their cattle and so if their cattle cause damage to someone else's property, the ranchers are not liable to provide compensation to the injured farmer
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education