Suppose that a railroad runs beside a field in which commercial crops are grown. The railroad is powered by a steam locomotive that spews hot cinders out of its smokestack. From time to time those cinders land on the crops nearest to the track and burn them to the ground. Assume that each year, the farmer whose crops are burned loses 2500 dollars in profits, and that the annual cost to the railroad of installing and maintaining a spark-arrester that would prevent any damage to the crop is 1750 dollars.
a) Is it socially efficient for the locomotive to do without the spark-arrester here? Briefly explain why or why not?
b) If the farmer is granted property rights to the land nearest the tracks, so the railroad must compensate the farmer for any burned crops, will the railroaf install the spark-arrester? Briefly explain why or why not.
c) Will the spaker-arrester be installed if the railroad is given the right to emit sparks without liability?Briefly explain why or why not.
d) Given your answers to (b) and (c), does it matter to anyone who is granted property rights in this case?Briefly explain why or why not.
Suppose now that rather than being owned by a single farmer, and land along the railroad is owned by 100 farmers, each of whom shares equally in the loss from the cinders.
e) Do you think it would matter to anyone who is granted property rights in this situation? Briefly explain why or why not.