Back in the old days, a railway owned tracks that ran between two small cities. Several farms were l

Feb 3rd, 2012
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Back in the old days, a railway owned tracks that ran between two small cities. Several farms were located alongside the tracks. The steam engines used in those days sometimes threw off sparks, which would cause crops beside the tracks to catch fire. The specific facts of the situation are as follows: The cost of raising crops in the acreage within range of the sparks was $100 per year. The market value of the crops grown on land within range of sparks (if there were no fires) was $130 per year. The engine that pulled the trains between the two towns could be fitted with a device that eliminated spark damage (no matter how many round trips it took) at a cost of $70 per year. The relationship between the number of round trips scheduled daily by the railway, the costs and revenues of the railway, and the annual amount of spark damage if crops were planted next to the tracks are described in the following table (you have enough information to fill in the last column): Daily Round Trips....

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Back in the old days, a railway owned tracks that ran between two small cities. Several farms were located alongside the tracks. The steam engines used in those days sometimes threw off sparks, which would cause crops beside the tracks to catch fire. The specific facts of the situation are as follows:The cost of raising crops in the acreage within range of the sparks was $100 per year.The market value of the crops grown on land within range of sparks (if there were no fires) was $130 per year.The engine that pulled the trains between the two towns could be fitted with a device that eliminated spark damage (no matter how many round trips it took) at a cost of $70 per year.The relationship between the number of round trips scheduled daily by the railway, the costs and revenues of the railway, and the annual amount of spark damage if crops were planted next to the tracks are described in the following table (you have enough information to fill in the last column):Daily Round Trips Total Cost Marginal CostTotal RevenueMarginal RevenueTotal Crop destruction from trainsMarginal Crop destruction 1$50$50$100$100$202$100$50$180$80$403$150$50$240$60$554$200$50$280$40$601. Assume first that transaction costs are high enough to prevent bargaining between the railway company and the farmers, and that the railway has no legal liability for the crops it destroys.a. How many round trips per day will the railway schedule? Why? Will it purchase the spa

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