Question

Cattle Rancher Farmer Fence | 20,000 90,000 No Fence 60,000 5,000 A cattle rancher and a farmer own adjacent fields. Occasionally the cattle stray from the ranch and eat some crops of the farmer. Installing a fence can prevent the cattle from straying. If installed, the fence would cost $30,000. The above table lists the values to each party of their property with and without a fence installed. If the cattle rancher owns the property rights so that the farmer is liable for any damage, then ( A) the farmer will pay to install the fence and earn profits of $60,000 OB) the farmer will pay to install the fence and compensate the rancher. The farmer's profits will be $20,000 O C) the farmer will not install the fence and earn profits of $5,000. OD) the farmer will not install the fence but will compensate the rancher. The farmer's profits will be $5,000.

Answer 1

If the farmer doesn't install a fence, then the value is $5000, if the farmer installs a fence, then net benefit = $90000-$30000= $60000. Therefore, he definitely gets to install a fence all in all and from this it can be mentioned that the farmers will install and earn profit of $60,000

Therefore (A) is the answer to the question