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## These facts are used for questions 1-2. A farmer’s fields are right next to the train tracks, where sparks from the trains set the field on fire. The railroad profit from running zero, one, two or three trains is shown below. The columns indicate the number of trains running. Total railroad profits are the total profits to the railroad from running the specified number of trains. Total lost farmer profits are total profits the farmer loses from a specified number of trains running.    0 1 2 3 Total Railroad Profit \$200 \$300 \$350 \$410 Total Lost Profit for Farmer \$0 \$100 \$125 \$300 1. What is the socially optimal number of trains? A) 0  B) 1 C) 2 D) 3 E) Not enough information 2.How many trains will run if the farmer is granted a property right to be free of sparks? A) 0 B) 1 C) 2 D) 3 E) Depends on transaction costs

These facts are used for questions 1-2. A farmer’s fields are right next to the train tracks, where sparks from the trains set the field on fire. The railroad profit from running zero, one, two or three trains is shown below. The columns indicate the number of trains running. Total railroad profits are the total profits to the railroad from running the specified number of trains. Total lost farmer profits are total profits the farmer loses from a specified number of trains running.

 0 1 2 3 Total Railroad Profit \$200 \$300 \$350 \$410 Total Lost Profit for Farmer \$0 \$100 \$125 \$300

1. What is the socially optimal number of trains?

A) 0

B) 1

C) 2

D) 3

E) Not enough information

2.How many trains will run if the farmer is granted a property right to be free of sparks?

A) 0

B) 1

C) 2

D) 3

E) Depends on transaction costs

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