In a well-known legal case, Miller v. Schoene, a classic conflict of property rights was featured. Red cedar trees, used only for ornamental purposes, carried a disease that could destroy apple orchards within a radius of two miles. There was no known way of avoiding the damage except by destroying the cedar trees or ensuring that apple orchards were at least two miles away from the cedar trees. The apple farmer sought an injunction to force the owner of the cedar trees to destroy them. Suppose it would cost the owner of the cedar trees $800 to destroy his trees (this includes the value that he places on having the trees), and it would cost the apple farmer $1500 in lost revenues from not being able to plant apple trees on his property (suppose these are the only options; that is, either all trees are cut down or none are, and either all the land planted with apple trees or none of it is).
a. Suppose society consists only of the owner of the cedar trees and the apple farmer. What is the efficient outcome (cedar trees or apple trees)?
b. Assume that the owner of the cedar trees and the apple farmer can bargain cost less. What will be the outcome if the court grants the injunction?
c. What is the outcome if the court does not grant the injunction? 2 pts. d. How would your answers to a. and b. change if the parties cannot bargain?