Question 3. Mulberries (21 points) My house (on the east side of Madison) has a giant mulberry tree in the middle of our yard. My family and I love the shade we get from the tree; but some of the tree's branches extend over my neighbor Simone's driveway, and every summer, her car gets completely covered in mulberries. (They look kind of like blackberries, they're dark purple, and the juice gets everywhere!) There are several ways to address this. I could do nothing; I could trim the tree branches a little bit; I could trim the tree branches a lot; or I could cut down the tree entirely. I can trim (or cut down) the tree at no cost, but the more I trim it, the less enjoyment my family and I will get from it. Simone could also choose to build a basic carport to protect her car, which would cost her $500, but it wouldn't shield her car completely. Each combination of actions gives a different combination of payoffs: My family's and Cost incurred by Simone's my enjoyment Simone to build disutility from from tree carport mulberries Nobody does anything 5,000 0 2,000 I trim the tree a little 4,500 0 -1,200 I trim the tree a lot 3,000 0 -500 Neighbor builds carport, I do nothing 5,000 500 -1,000 Neighbor builds carport, I trim the tree a little 4,500 -500 300 Neighbor builds carport, I trim the tree a lot 1,500 -500 -100 I cut down the tree 0 For parts (a)-(d), suppose that under Madison law, my tree is considered a nuisance if it drops any berries on a neighbor's property, and Simone is entitled to an injunction forcing me to cut down the tree. (a) What outcome (what combination of actions) is efficient? Why? (b) What outcome do you predict if there are no transaction costs? Why? (c) What outcome do you predict if transaction costs are high between Simone and me? Why? (d) If Simone and I meet to try to negotiate a better outcome, what are our threat points? For parts (e)-(g), suppose instead that under Madison law, my tree is considered a nuisance and Simone is entitled to damages. (e) What outcome do you predict if there are no transaction costs? Why? (f) What outcome do you predict if transaction costs are high between Simone and me? Why? (g) If transaction costs are high, which type of damages, temporary or permanent, give me an incentive to invest in new tree trimming technology in the future if it becomes cheaper and better? Explain