This problem presents a variation of the rancher-farmer example that we discussed in class. Suppose that a rancher faces a choice of how many cattle to put on his property. If he puts more than 21, they will wander off and do some degree of damage to the neighboring farmer's land. The profits to the rancher and the damage done to the farmer are listed in the following table: Number of cattle Total profit to rancher Marginal profit to rancher Total damage to farmer Marginal damage to farmer Net social benefit 21 400 -- 0 -- 400 22 418 18 4 4 414 23 432 14 12 8 420 24 441 9 24 12 417 25 447 6 40 16 407 26 451 4 60 20 391 27 453 2 84 24 369 28 452 -1 112 28 340 29 447 -5 144 32 303 Suppose that the rancher is not liable for damages and the two parties cannot bargain. What will be the outcome in terms of the number of cattle grazed? Suppose that the rancher is not liable for damages and the parties can bargain costlessly. What will be the outcome in terms of the number of cattle ?

Answer rating: 100% (QA)

ANSWER 1 Rancher Not Liable for Damages and No Bargaining NonCooperative Outcome In this case the ra... View the full answer