Another example Coase offers involves a railroad with a train running past multiple wheat farms. Often times a spark from the rails will catch fire to the wheat, burning their crop. Assume the damages to the farmers is greater than the value of the rail to the railroad company, and there is no way to both prevent the fires and continue running the train.

What is the efficient outcome?

Group of answer choices

a. There is not enough information to determine the efficient outcome

b. The railroad should shut down.

c. The railroad should compensate the farmers and continue operating.

d. The railroad should continue operating.

Will the efficient outcome occur?

Group of answer choices

a. No, transaction costs are too high.

b. The efficient outcome will only occur if the property rights are initially given to the farmers(it is the railroad's responsibility to prevent the fires). Otherwise, transaction costs are likely too high for bargaining to occur.

c. Yes, the parties will bargain for the efficient outcome.

d. The efficient outcome will only occur if the property rights are initially given to the railroad (it is the farmers' responsibilities to prevent the fires). Otherwise, transaction costs are likely too high for bargaining to occur.