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Midterm Test
Thursday, May 18, 2023
6:10PM to 8PM
ECO 320F - An Economic Analysis of Law
Department of Economics
University of Toronto
INSTRUCTIONS:
All questions must be answered on
this Test paper in the space provided. Full marks will only be
awarded to fully explained answers accompanied by a fully
labelled diagram or diagrams where appropriate. Please read
all questions carefully before answering them.
TIME:
One Hour (1) and Fifty (50) Minutes
AIDS:
No aids except a non-programmable
calculator are allowed
Please turn over to Page 2
Page 2
(15 Marks)
QUESTION 1:
Explain when a rule of capture would be efficient. Use two (2)
examples in your explanation.
Please turn over to Page 3
Page 3
(15 Marks)
QUESTION 2:
If everyone has free access to a fishery that is unowned by any
person, group or government, fully analyze the dilemma that
results. How might the users of the fishery efficiently manage
access? What are the alternative arrangements the users
could make? Is it possible to have an efficient arrangement?
Please turn over to Page 4
Page 4
(15 Marks)
QUESTION 3: Explain the distinction between
private marginal cost and social marginal cost for property
rights that are subject to zoning restrictions in a city. Use a
diagram to illustrate your answer.
Please turn over to Page 5
Page 5
(10 Marks)
QUESTION 4:
Fully explain using economic analysis why it is inefficient to
use prior government insurance on a property being
expropriated as an offset?
Please turn over to Page 6
Page 6
(15 Marks)
QUESTION 5:
Fully explain whether the following situations are market
transactions, private or public externalities.
(a) (5 marks) A lighthouse warns ships about rocks.
(b) (5 marks) An owner’s building blocks the sunlight to
the neighbour’s building.
(c) (5 marks)
A bidder is outbid at an auction on ebay.
Please turn over to Page 7
Page 7
(15 Marks)
QUESTION 6:
Compare and contrast, with use of an example, a right to an
injunction with the right to compensation for a property rights
owner.
Please turn over to Page 8
Page 8
(15 Marks)
QUESTION 7: Suppose the rule of strict liability
is imposed by the courts on a firm. Assuming no transaction
costs, could bargaining occur? Give one example?
Total Marks = 100