Determine what is the socially optima number of trains

Reference no: EM13238457

Consider a railroad is next to a farm.Each time the train passes by the farm,sparks from the train fly into the farm and destroy some of the crop.The following gives the marginal cost of the train that pass the farm on one month.

of train marginal cost of the train crop damage social marginal cost
3 400 1000
4 1000 1000
5 1800 1000
6 2200 1000
7 2800 1000
8 3400 1000

a) what is the social marginal cost?If each train load can be sold for $2800, what is the socially optima number of trains that should pass the farm each month?

b)Given that property rights are clearly defined and negotiation is countless, how could we arrive at the socially optimal decision without government intervention?

Reference no: EM13238457

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