Use the following information for questions 3-6. 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 1 2 3 Total Railroad Profit $100 $200 $300 Total Lost Profit for Farmer $40 $130 $250 Assuming transaction costs are $0, if the Farmer and Railroad split all gains from trade evenly, would the Farmer prefer his land to be protected by a liability rule or a property rule? A. A liability rule B. A property rule C. The Farmer is indifferent between the two rules D. None of the above
Use the following information for questions 3-6. 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 |
|||
|
|
1 |
2 |
3 |
|
Total Railroad Profit |
$100 |
$200 |
$300 |
|
Total Lost Profit for Farmer |
$40 |
$130 |
$250 |
Assuming transaction costs are $0, if the Farmer and Railroad split all
| A. |
A liability rule |
|
| B. |
A property rule |
|
| C. |
The Farmer is indifferent between the two rules |
|
| D. |
None of the above |
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