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A Cattle Rancher and a Wheat Farmer Own Adjacent Properties

question 67

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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 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.  Fence no Fence  Cattle Rancher $40,000$35,000 Wheat Farmer $50,000$20,000\begin{array}{lll}&\text { Fence }&\text {no Fence }\\\text { Cattle Rancher } & \$ 40,000 & \$ 35,000 \\\text { Wheat Farmer } & \$ 50,000 & \$ 20,000\end{array} 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:


Definitions:

Total Revenue

Total financial gains received by a firm from its commercial sales and service operations throughout a defined period.

Elastic

A characteristic of a supply or demand curve that describes how much the quantity supplied or demanded responds to changes in price.

Unit Elastic

A situation when a change in price leads to an equal proportional change in quantity demanded or supplied.

Elasticity of Demand

A gauge of the degree to which a change in price impacts the demanded amount of a good or service.

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