A and B live on adjacent plots of land. Each has two potential uses for her land, the present values of each of which depend on the use adopted by the other, as summarized in the table. All the values in the table are known to both parties.

A Apple growing Pig farming Rental housing A: $200 A: $450 B: $700 B: $400 B

Bee keeping A: $400 A: $450 B: $650 B: $500

a. If there are no negotiation costs, what activities will the two pursue on their land?

b. If there are negotiation costs of $150, what activities will the two pursue on their land?

c. What is the maximum net income A can earn in parts

(a) and

(b) above?