2) (6pts) The Coase Theorem: Fred has opened a cattle ranch one mile from Donna's Restaurant. In the evening the odor from the cattle ranch gently wafts over to the restaurant. The more cattle on the ranch the greater the unpleasant odor and the more Donna's business is harmed. Because of this nuisance (or production externality), Donna files a lawsuit against Fred seeking an injunction that would shut-down the ranch. The economics of the conflict are summarized as follows: # of cattle Value of Value of on ranch Fred's Ranch Donna's Restaurant 500 $250,000 $100,000 400 $225,000 $160,000 300 $190,000 $210,000 200 $145,000 $250,000 100 $90,000 $280,000 0 $25,000 $300,000 What will happen if there are no transaction costs a.k.a. no barriers to negotiations? Briefly explain your answer under the following outcomes: (3pts) The court grants Donna an injunction against Fred? ii ) (3pts) The court denies the injunction against Fred