Business, 06.11.2019 04:31 destinypierre
Choochoo company operates trains on a new railroad running through a rural town called wellspring, earning the company revenues of $15,000 a day and incurring no explicit costs. however, the sparks created from running trains is leading to fires in neighboring corn fields. the fires cause $5,000 in damaged crops per day. property rights are such that choochoo company can operate as many trains as it wishes with no regulation
a. what are the private and social costs associated with running trains in wellspring?
b. cooltech corp develops a device that can control the sparks and prevent trains from causing fires. cooltech rents this device out for $7.000 a day. given the current assignment of property rights would choochoo company be willing to rent this device? would farmers be willing to rent it?
c. in the interest of economic efficiency should cooltech's device be installed? given the current property rights can this outcome be achieved? briefly explain how.
d. suppose that all the costs to the residents were actually underestimated and are actually twice what they were ($10,000). in the interest of economic efficiency should cooltech's device be installed for
choochoo company's trains? given the current property rights can this outcome be achieved? briefly explain how.
e. how might your answers to parts c) and d) change if property rights were assigned to farmers in wellspring?
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Choochoo company operates trains on a new railroad running through a rural town called wellspring, e...
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