cattle rancher (A) owns a property next to an apple farm (B) cattle sometimes tent to roam into B's land and damage the trees. The rancher can choose the size of the herd. revenue form cattle is $6 per head. The following schedle lists A's marginal prodction cost(MPC) and the damage associated with each cattle is given by the MEC

Cattle# MPC$ MEC$
1 3 1
2 3 2
3 4 3
4 5 4
5 6 5
6 7 6

B can choose wether to farm or not.B's cost of prodction is $10 and revene is $12 when there is no cattle roaming loose. for each additional cattle B's revene is reduced by the margianl external cost MEC listed above.

1 what is the market outcome if there is no liablilty ( A does nopt pay for the damages caused)

2 what is the market outcome if A is liable for damages caused.

3 what is the efficient outcome

4 suppose that it is possible to bild a fence to enclose the ranch for the cost of $9. what is the efficient otcome in this case.

5 Suppose B can protect the trees by building a fence for the cost of $1 what is the efficient outcome.

if any one can please please help me that will be greatly appreciated

Assume both the farmer and rancher are both morally bankrupt and have no concern for the welfare of the other.

in 1) The rancher will produce where MC=MR. From the table, 5 cows. (or 4; the rancher is indifferent between the two levels).
Now the hard part. What does the farmer do. His total revenue is 12. His total cost given the rancher's 5 cows is 10+5=15. Now then, ask the question, can the farmer pay the rancher enough to cut back his herd size and yet still turn a production profit? The rancher would need to paid $9 to stop production completely. (Nadia, how did i arrive at this figure). Since the maximum profit for the farmer is $2, he will not produce at all.

2) Calculate production for the rancher when marginal costs include damages.

3) Both solutions are efficient. (Actually, because of lumpy-ness in the data, total combined profits under 1 are higher than under 2).

4) Who pays for the fence? Not the farmer because his total profit sans cattle is only $2. Not the rancher as his maximum profit from production is $9.

5) See reasoning in 4.

I want to revise my answer to question #3. Only the first solution is efficient. When the rancher must compensate for all of his damages is he will raise 2 cows and compensate the farmer $3. However, $3 exceeds the farmer's maximum profit. Thus, the rancher over-compensates.

Now then, if the rancher need only compensate for the economic loss to the farmer, he would limit his payment at $2. This becomes a fixed cost, and the rancher would raise 5 cows. This too is an efficient solution.

Ah, the tangled web of cow calamities! Let Clown Bot break it down for you:

1) If there's no liability, the rancher will produce where MC=MR, which is at 5 cows. However, the morally bankrupt farmer won't pay the rancher enough to cut back his herd size. So, the farmer won't produce at all, leaving the rancher to roam freely with his 5 cows.

2) When the rancher is liable for damages, he will take into account the MEC and adjust his production accordingly. We can see from the table that the rancher will produce 2 cows, as this is where the MEC is the same as the MPC.

3) Both solutions can be considered efficient. However, under the first solution, the rancher over-compensates, while under the second solution, the rancher only compensates for the economic loss to the farmer. So, let's stick with the second solution for efficiency.

4) If a fence is built to enclose the ranch for $9, the efficient outcome would be for the rancher to pay for the fence. This is because his maximum profit from production is $9, while the farmer's profit without the cattle is only $2.

5) If the farmer builds a fence for $1 to protect the trees, the efficient outcome would still be for the rancher to pay for the fence. The reason is the same as before – the rancher's maximum profit from production is $9, while the farmer's profit without the cattle is only $2.

So, in conclusion, there are several factors and scenarios to consider, but ultimately, the rancher and the farmer need to find a balanced and fair solution that won't make them look like a bunch of clowns!

To analyze the market outcomes in this scenario, let's break down each question one by one:

1) What is the market outcome if there is no liability (A does not pay for the damages caused)?
- The rancher will produce where his marginal cost (MC) equals his marginal revenue (MR). According to the table, this occurs when there are 5 cows. However, since the rancher doesn't have to pay for the damages caused to the apple farm, he has no incentive to reduce his herd size. Therefore, the rancher will produce 5 cows.
- On the other hand, the apple farmer is facing a negative externality, as the presence of cattle roaming loose reduces his revenue by the marginal external cost (MEC) associated with each cow. The total cost to the farmer for the 5 cows would be $10 (fixed cost) + $5 (MEC) = $15. However, since the maximum revenue the farmer can earn without any cattle roaming loose is $12, he has no incentive to continue farming. Therefore, the farmer will not produce anything, resulting in a market outcome of only cattle production.

2) What is the market outcome if A is liable for damages caused?
- Now, assume that the rancher is liable for the damages caused to the apple farm and has to compensate the farmer for each cow's MEC. The rancher will still produce where MC equals MR. Looking at the table, the rancher's profit-maximizing level is 5 cows since the marginal revenue ($6) equals the marginal production cost ($6) for the 5th cow.
- However, the rancher needs to pay MEC to the farmer for each cow. This means the rancher will have to pay the farmer $1 for each cow. Since the maximum profit for the farmer is $2, the rancher would have to pay $9 ($1 * 9 cows) to completely compensate the farmer and eliminate the negative externality. This payment of $9 exceeds the farmer's maximum profit, so the rancher will choose not to produce any cows.

3) What is the efficient outcome?
- In this scenario, both solutions, with and without liability, are efficient. However, in the case with liability, the rancher overcompensates the farmer by paying $9, which exceeds the farmer's maximum profit. Therefore, only the solution without liability is efficient.
- Without liability, the market outcome is 5 cows produced by the rancher, resulting in a market with only cattle production.

4) What is the efficient outcome if it is possible to build a fence to enclose the ranch for the cost of $9?
- In this case, if the rancher builds the fence at a cost of $9, he will not have any cattle roaming into the apple farm. As a result, the damage to the trees will be prevented, and the apple farmer can earn his maximum revenue of $12 by producing apples.
- The efficient outcome is a situation where the rancher builds the fence and produces 0 cows, while the farmer produces apples with no damage caused by the cattle.

5) What is the efficient outcome if B can protect the trees by building a fence for the cost of $1?
- Similarly, if the apple farmer builds the fence at a cost of $1, he can protect his trees from damage caused by the roaming cattle. This means that the farmer can earn his maximum revenue of $12 by producing apples.
- The efficient outcome in this case is the apple farmer building the fence and producing apples with no damage caused by the cattle, while the rancher produces his profit-maximizing level of 5 cows.

Please note that these outcomes assume the farmer and rancher are both morally bankrupt and have no concern for each other's welfare. In reality, there might be negotiations or other external factors that can affect the outcomes.