A Cattle Rancher and a Wheat Farmer Own Adjacent Properties

question 100

Multiple Choice

A cattle rancher and a wheat farmer own adjacent properties that may or may not be separated by a fence.The accompanying table identifies the annual profit received by each party per year in the event there is,or there is not,a fence.If there is no fence,one can be installed and maintained at an annual cost of $25,000. If legal rights are assigned to the wheat farmer so that the cattle rancher is liable for any damage caused by his cattle to the wheat crop,then the

• A) rancher will choose to close his ranch.
• B) farmer will not allow the rancher to stay in business.
• C) rancher will pay to build the fence.
• D) rancher will choose to compensate the farmer for damages.
• E) rancher will be indifferent toward neither building the fence nor compensating the farmer for damages.

Explain the concept of opportunity cost and its relationship to the PPF.

Identify factors that can shift or rotate the PPF.

Understand the principle of increasing opportunity costs and its representation on the PPF.

Recognize points of efficiency, inefficiency, and unemployment on the PPF.

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Definitions:

Events

Occurrences or incidents that have significance for the operations, financial performance, or cash flows of an entity.

Common Stock

Equity ownership in a corporation, representing a claim on its dividends and assets.

Equity

The stake or ownership interest shareholders have in a company, represented by their shares of stock.

Chart Of Accounts

A systematic list of account titles and numbers used by a company to organize its financial transactions and prepare financial statements.