Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 3, Problem 9MC
To determine
The cost of decision.
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A farmer is located next to the rancher. They face the following problem.Cattle graze on the farmer's fields and cause $30 worth of damage to corn
each year. The rancher's business is worth $100 annually (not taking into account any crop damage). The farmer's business is worth $80 before the
cattle trample the corn It would cost $10 to build a fence that would keep the cattle off the farmer's property. If the farmer is given property rights
If the rancher is given property rights
O A. the rancher will pay the farmer $30 in damages; the farmer will accept the $30 in crop damages
B. the rancher will pay the farmer $30 in damages; the farmer will build the fence
O C. the rancher will build the fence; the farmer will build the fence
O D. the rancher will build the fence; the farmer will accept the $30 in crop damages
10. The U.S. Government bought 112,000 acres of land in southeastern Colorado in 1968 for $17,500,000. The cost of using this land today exclusively for the reintroduction of the black-tailed prairie dog
Group of answer choices
Is equal to the original purchase price.
Is equal to the market value of the land
Is zero, because the land represents a sunk cost
Is equal to the total dollar value the land would yield if used for farming and ranching
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 $410Total 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…
Chapter 3 Solutions
Managerial Economics: A Problem Solving Approach
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