Homework Help is Here – Start Your Trial Now!
Business
Economics
A train track runs through a rancher's land. Each time a train runs on the track, it causes one of the rancher's cows to run away, resulting in a loss of $200 to the rancher. The following table gives the train operator's total revenue and costs per number of trains she runs through the land. Trains run Operator revenue ($) Operator costs 1 350 100 700 200 3 1,050 1,400 1,750 2,100 400 4 700 5 1,100 1,600 6 PART A: What is the socially optimal number of trains run? PART B: Now suppose that the train operator has property rights. Assuming no negotiation is possible, how many trains will she choose to run? PART C: Now suppose that the operator and the rancher can negotiate (and that negotiation is costless). What is the least the operator would accept to run the socially optimal number of trains from part A? What is the most the rancher would offer?

A train track runs through a rancher's land. Each time a train runs on the track, it causes one of the rancher's cows to run away, resulting in a loss of $200 to the rancher. The following table gives the train operator's total revenue and costs per number of trains she runs through the land. Trains run Operator revenue ($) Operator costs 1 350 100 700 200 3 1,050 1,400 1,750 2,100 400 4 700 5 1,100 1,600 6 PART A: What is the socially optimal number of trains run? PART B: Now suppose that the train operator has property rights. Assuming no negotiation is possible, how many trains will she choose to run? PART C: Now suppose that the operator and the rancher can negotiate (and that negotiation is costless). What is the least the operator would accept to run the socially optimal number of trains from part A? What is the most the rancher would offer?

Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter4: Extent (how Much) Decisions
Section: Chapter Questions
Problem 3MC
See similar textbooks
icon
Related questions
Question
!
A train track runs through a rancher's land. Each time a train runs on the track, it causes one of the rancher's cows to run away, resulting in a loss of $200 to the rancher. The following table gives the train operator's total revenue and costs per number of trains she runs through the land. Trains run Operator revenue ($) Operator costs 1 350 100 700 200 3 1,050 1,400 400 4 700 1,750 2,100 1,100 1,600 5 6 PART A: What is the socially optimal number of trains run? PART B: Now suppose that the train operator has property rights. Assuming no negotiation is possible, how many trains will she choose to run? PART C: Now suppose that the operator and the rancher can negotiate (and that negotiation is costless). What is the least the operator would accept to run the socially optimal number of trains from part A? What is the most the rancher would offer? PART D: Finally, suppose that in order to negotiate the operator and rancher must hire a lawyer. The lawyer's fees are $300. Will they still negotiate? Why or why not?
Transcribed Image Text:A train track runs through a rancher's land. Each time a train runs on the track, it causes one of the rancher's cows to run away, resulting in a loss of $200 to the rancher. The following table gives the train operator's total revenue and costs per number of trains she runs through the land. Trains run Operator revenue ($) Operator costs 1 350 100 700 200 3 1,050 1,400 400 4 700 1,750 2,100 1,100 1,600 5 6 PART A: What is the socially optimal number of trains run? PART B: Now suppose that the train operator has property rights. Assuming no negotiation is possible, how many trains will she choose to run? PART C: Now suppose that the operator and the rancher can negotiate (and that negotiation is costless). What is the least the operator would accept to run the socially optimal number of trains from part A? What is the most the rancher would offer? PART D: Finally, suppose that in order to negotiate the operator and rancher must hire a lawyer. The lawyer's fees are $300. Will they still negotiate? Why or why not?
Expert Solution
steps

Step by step

Solved in 5 steps with 5 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Bayesian Nash Equilibrium
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Managerial Economics: A Problem Solving Approach
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: Applications, Strategies an…
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Micro Economics For Today
Micro Economics For Today
Economics
ISBN:
9781337613064
Author:
Tucker, Irvin B.
Publisher:
Cengage,
Survey Of Economics
Survey Of Economics
Economics
ISBN:
9781337111522
Author:
Tucker, Irvin B.
Publisher:
Cengage,
Economics For Today
Economics For Today
Economics
ISBN:
9781337613040
Author:
Tucker
Publisher:
Cengage Learning
Principles of Economics 2e
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
SEE MORE TEXTBOOKS