ECO320 MIDTERM EXAM 2025
QUESTIONS AND ANSWERS
4 questions of property law - ANSWER-1: how are ownership rights established?
2:what can be privately owned? #. what may owners do with their property? 4.
what are the remedies for the violation of property rights?
coase theorem - ANSWER-when transaction costs are zero, an efficient use of
resources results from private bargaining, regardless of the legal assignment of
property rights
open range rule - ANSWER-the farmer is responsible for keeping the archers
cattle off his property and bears the damages if the cattle got in
closed range rule - ANSWER-the rancher is responsible for keeping the cattle off
the farm property and the rancher bears the damages if the cattle got in
if parties can cooperate - ANSWER-they will be indifferent to the closed range
rule and the open range rule. So: the fence will be built regardless of which rule
applies/ The resulting surplus will be shared and might go towards building a fence
payoff function for R - ANSWER-SSr = Wr + T - Crx
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 1
, payoff function for F - ANSWER-SSf = Wf - T - Bf(1-x)
rule of first possession - ANSWER-maintaining low transaction costs by defining
property rights clearly and simply is the rule of first possession (rule of capture).
This encourages efficiency by emphasizing the production of wealth over the
transfer of wealth. But, this rule may lead to over investment
prisoners dilemma - ANSWER-arises with each owner believing that the other
owner is "free riding"
rule 1: polluters right to pollute - ANSWER-(no bargain) no pollution equipment is
installed by the electric company but is installed by the laundry company. Joint
surplus is maximized here
rule 2: owners right to sue for damages - ANSWER-no solution equipment is
installed by either the electric company or the laundry place. Joint surplus is 1,100.
BUT L can sue E for 200.. E bargains by installing the flter for them at 100
rule 3: owners right to sue for an injunction - ANSWER-pollution equipment is
installed by the electric company. Joint surplus is 800. BUT instead of losing 500,
E bargains with L and installs the filters for 100
if normative Hobbes thm is applied to the prisoners dilemma problem -
ANSWER-rule 1 is the most optimal
what does the prisoners dilemma problem showcase? - ANSWER-that the
damages and injunction remedies are equally efficient when the transaction costs
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 2
QUESTIONS AND ANSWERS
4 questions of property law - ANSWER-1: how are ownership rights established?
2:what can be privately owned? #. what may owners do with their property? 4.
what are the remedies for the violation of property rights?
coase theorem - ANSWER-when transaction costs are zero, an efficient use of
resources results from private bargaining, regardless of the legal assignment of
property rights
open range rule - ANSWER-the farmer is responsible for keeping the archers
cattle off his property and bears the damages if the cattle got in
closed range rule - ANSWER-the rancher is responsible for keeping the cattle off
the farm property and the rancher bears the damages if the cattle got in
if parties can cooperate - ANSWER-they will be indifferent to the closed range
rule and the open range rule. So: the fence will be built regardless of which rule
applies/ The resulting surplus will be shared and might go towards building a fence
payoff function for R - ANSWER-SSr = Wr + T - Crx
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 1
, payoff function for F - ANSWER-SSf = Wf - T - Bf(1-x)
rule of first possession - ANSWER-maintaining low transaction costs by defining
property rights clearly and simply is the rule of first possession (rule of capture).
This encourages efficiency by emphasizing the production of wealth over the
transfer of wealth. But, this rule may lead to over investment
prisoners dilemma - ANSWER-arises with each owner believing that the other
owner is "free riding"
rule 1: polluters right to pollute - ANSWER-(no bargain) no pollution equipment is
installed by the electric company but is installed by the laundry company. Joint
surplus is maximized here
rule 2: owners right to sue for damages - ANSWER-no solution equipment is
installed by either the electric company or the laundry place. Joint surplus is 1,100.
BUT L can sue E for 200.. E bargains by installing the flter for them at 100
rule 3: owners right to sue for an injunction - ANSWER-pollution equipment is
installed by the electric company. Joint surplus is 800. BUT instead of losing 500,
E bargains with L and installs the filters for 100
if normative Hobbes thm is applied to the prisoners dilemma problem -
ANSWER-rule 1 is the most optimal
what does the prisoners dilemma problem showcase? - ANSWER-that the
damages and injunction remedies are equally efficient when the transaction costs
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 2
