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please answer all questions in full please. Assume a cattle producer and a farmer live adjacent to each other and the cattle producer's cattle damage

please answer all questions in full please. image text in transcribed
Assume a cattle producer and a farmer live adjacent to each other and the cattle producer's cattle damage the crops of the farmer. Assume the Marginal Net Benefit function for the rancher when he runs cattle can be expressed as Equation 1: (1) MNB = 400 - 10C The marginal net benefit (MNB) is measured in dollars, and is the number of cattle the rancher runs. Recall that MNB - MB-MC. Assume the marginal damage (MD) imposed on the farmer when the rancher runs cattle can be expressed as Equation 2. (2) MD = 6C Where MD is measured in dollars and is the number of cattle. Questions: 1. Under a zero liability rule (rancher is not responsible for damages) how many head of cattle does the rancher run before negotiations? Explain your answer. (3 Points) 2. Under a full liability rule (the rancher is legally prohibited from imposing any damages on the farmer) how many head of cattle does the rancher run before any negotiations? Explain your answer. (3 Points) 3. Now assume a zero liability rule, but allow the rancher and farmer to negotiate. (1) What is the optimal number of cattle? (2) Who pays the cost of compensation? (3) What is the per head compensation price? (4) What is the amount of the compensation payment? (5) What is the net gain of negotiation to each? (10 points) 4. Now assume a full liability rule, but allow the rancher and farmer to negotiate. (1) What is the optimal number of cattle? (2) Who pays the cost of compensation? (3) What is the per head compensation price? (4) What is the amount of the compensation payment? (5) What is the net gain of negotiation to each? (10 points) 5. Assume a strong fence can be built at an annual cost of $4,000 and that the fence would keep the cattle out of the farmer's fields. Would this impact your answer to question 3? Would this impact your answer to question 4? Fully explain your answer. (4 points) 6. Assume a strong fence can be built for an annual cost of $3,000 and that the fence would keep the cattle out of the farmer's fields. Would this impact your answer to question 3? Would this impact your answer to question 47 Fully explain your answer. (4 points) 7. Assume a strong fence can be built for an annual cost of $2,000 and that the fence would keep the cattle out of the farmer's fields. Would this impact your answer to question 3? Would this impact your answer to question 4? Fully explain your answer. (4 points)

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