Suppose That Company A's Railroad Cars Pass Through Farmer B's

question 112

Multiple Choice

Suppose that Company A's railroad cars pass through Farmer B's corn fields. The railroad causes an externality to the farmer because the railroad cars emit sparks that cause $1,500 in damage to the farmer's crops. There is a special soy-based grease that the railroad could purchase that would eliminate the damaging sparks. The grease costs $1,200. Suppose that the railroad is not liable for any damage caused to the crops. Assume that there are no transaction costs. Which of the following characterizes an efficient outcome?

• A)The railroad will continue to operate but will pay the farmer $1,500 in damages.
• B)The railroad will purchase the grease for $1,200 and pay the farmer nothing because no crop damage will occur.
• C)The farmer will incur $1,500 in damages to his crops.
• D)The farmer will pay the railroad $1,200 to purchase the grease so that no crop damage will occur.

Distinguish between different statistical measures and their purposes in analyzing research data.

Understand the principles and applications of sampling in research.

Recognize the importance of hypothesis formation and testing in research methodology.

Understand the role and limitations of technology in facilitating research.

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Definitions:

Price Discrimination

A pricing strategy where identical or substantially similar goods or services are sold at different prices by the same provider.

Good Or Service

Any tangible product (good) or intangible offering (service) that can be sold or provided in a market to satisfy the demand of a customer.

Marginal Revenue

The additional income received from selling one more unit of a product or service.

Marginal Cost

The increase in total cost that arises from producing one additional unit of a good or service.