ECO320 MIDTERM Exam Questions and Verified Answers/Accurate Solutions| Already
Graded A+
4 questions of property law 1: how are ownership rights established? 2:what can be
privately owned? #. what may owners do with their property? 4. what are the remedies for the
violation of property rights?
coase theorem when transaction costs are zero, an efficient use of resources results from
private bargaining, regardless of the legal assignment of property rights
open range rule the farmer is responsible for keeping the archers cattle off his property and
bears the damages if the cattle got in
closed range rule the rancher is responsible for keeping the cattle off the farm property and
the rancher bears the damages if the cattle got in
if parties can cooperate they will be indifferent to the closed range rule and the open range
rule. So: the fence will be built regardless of which rule applies/ The resulting surplus will be
shared and might go towards building a fence
payoff function for R SSr = Wr + T - Crx
payoff function for F SSf = Wf - T - Bf(1-x)
rule of first possession maintaining low transaction costs by defining property rights clearly
and simply is the rule of first possession (rule of capture). This encourages efficiency by
emphasizing the production of wealth over the transfer of wealth. But, this rule may lead to
over investment
prisoners dilemma arises with each owner believing that the other owner is "free riding"
, rule 1: polluters right to pollute (no bargain) no pollution equipment is installed by the
electric company but is installed by the laundry company. Joint surplus is maximized here
rule 2: owners right to sue for damages no solution equipment is installed by either the
electric company or the laundry place. Joint surplus is 1,100. BUT L can sue E for 200.. E
bargains by installing the flter for them at 100
rule 3: owners right to sue for an injunction pollution equipment is installed by the electric
company. Joint surplus is 800. BUT instead of losing 500, E bargains with L and installs the filters
for 100
if normative Hobbes thm is applied to the prisoners dilemma problem rule 1 is the most
optimal
what does the prisoners dilemma problem showcase? that the damages and injunction
remedies are equally efficient when the transaction costs are zero. Also, if the transaction costs
are so high to prevent bargaining, the more efficient remedy is damages
when transaction costs are low injunction is the efiicient remedy. BECAUSE the right to
innjunction gives the parties a clearer position from which to bargain
when transaction costs are so high that they prevent bargaining... the court may socially
optimize the dispute by granting an injunction/ or compensation (damages) to the party who
values the outcome most in relative terms
normative Hobbes theorem when transaction costs are so high that they prevent
bargaining, the court may socially optimize the dispute by granting an injunction/ or
compensation (damages) to the party who values the outcome most in relative terms
under the coase theorem, with the opportunity to bargain, different legal rules: led to the
same economic outcome and optimal social surplus
Graded A+
4 questions of property law 1: how are ownership rights established? 2:what can be
privately owned? #. what may owners do with their property? 4. what are the remedies for the
violation of property rights?
coase theorem when transaction costs are zero, an efficient use of resources results from
private bargaining, regardless of the legal assignment of property rights
open range rule the farmer is responsible for keeping the archers cattle off his property and
bears the damages if the cattle got in
closed range rule the rancher is responsible for keeping the cattle off the farm property and
the rancher bears the damages if the cattle got in
if parties can cooperate they will be indifferent to the closed range rule and the open range
rule. So: the fence will be built regardless of which rule applies/ The resulting surplus will be
shared and might go towards building a fence
payoff function for R SSr = Wr + T - Crx
payoff function for F SSf = Wf - T - Bf(1-x)
rule of first possession maintaining low transaction costs by defining property rights clearly
and simply is the rule of first possession (rule of capture). This encourages efficiency by
emphasizing the production of wealth over the transfer of wealth. But, this rule may lead to
over investment
prisoners dilemma arises with each owner believing that the other owner is "free riding"
, rule 1: polluters right to pollute (no bargain) no pollution equipment is installed by the
electric company but is installed by the laundry company. Joint surplus is maximized here
rule 2: owners right to sue for damages no solution equipment is installed by either the
electric company or the laundry place. Joint surplus is 1,100. BUT L can sue E for 200.. E
bargains by installing the flter for them at 100
rule 3: owners right to sue for an injunction pollution equipment is installed by the electric
company. Joint surplus is 800. BUT instead of losing 500, E bargains with L and installs the filters
for 100
if normative Hobbes thm is applied to the prisoners dilemma problem rule 1 is the most
optimal
what does the prisoners dilemma problem showcase? that the damages and injunction
remedies are equally efficient when the transaction costs are zero. Also, if the transaction costs
are so high to prevent bargaining, the more efficient remedy is damages
when transaction costs are low injunction is the efiicient remedy. BECAUSE the right to
innjunction gives the parties a clearer position from which to bargain
when transaction costs are so high that they prevent bargaining... the court may socially
optimize the dispute by granting an injunction/ or compensation (damages) to the party who
values the outcome most in relative terms
normative Hobbes theorem when transaction costs are so high that they prevent
bargaining, the court may socially optimize the dispute by granting an injunction/ or
compensation (damages) to the party who values the outcome most in relative terms
under the coase theorem, with the opportunity to bargain, different legal rules: led to the
same economic outcome and optimal social surplus
