Law and Economics Exam 1 Gilgenbach

Common Law is practiced where?

The US and England

Which of the following is likely to exhibit positive externalities?

National Defense

What does it mean if an economist says a good is a private good?

It is rivalrous and excludable

I am in the market for a Globe Warnicke barrister cabinet (an antique piece of furniture). The cost of driving around to flea markets hoping to find one for sale is which type of transaction cost?

Search Cost

Suppose that I find a seller with such a cabinet available for purchase. They are asking $500, but I only want to pay $300. The cost of haggling over the appropriate price is which type of transaction cost?

Bargaining Cost

Suppose that the seller and I reach an agreement on price: $400. We also agree that I will pay her $40 per month for 10 months. The cost to her of collecting these payments is which type of transaction cost?

Enforcement Cost

Which of the following statements is true? (Coase)

The normative Coase theorem says "Structure the law so as to minimize transaction costs and lubricate bargaining."

Which of the following scenarios probably has the highest transaction costs?

Purchasing 1000 barrels of oil on the futures market (e.g. six months from now).

Which of the following statements is true?

-All Pareto improvements are also Kaldor-Hicks improvements
AND
-All Kaldor-Hicks improvements are not Pareto improvements but could be made into Pareto improvements with a transfer of cash.

Which of the following is one of the fundamental economic questions of property law?

- How do we resolve disputes about property ownership?
-What things may be owned?

Which of the following tends to lead to inefficiencies in markets?

The presence of taxes

What does it mean if a game features a Prisoner's Dilemma?

The Nash equilibrium is Pareto dominated by at least one other outcome

What is risk neutrality?

When people are exactly indifferent between a more-risky gamble and a less-risky gamble, so long as they have the same expected value.

What are the two principles for establishing ownership of fugitive property?

Tied ownership and first possession

Which of the following is not a type of intellectual property protection?

These are all types of intellectual property protection

In class, we listened to a song that faced a copyright dispute involving sampling of an Egyptian song, "Khosara Khosara." What song did we listen to?

Big Pimpin'

How long does a patent currently last in the United States?

20 years after filing for the patent

How long does a copyright currently last in the United States?

70 years after the death of the creator (120 for corporate works)

How long does a trademark currently last in the United States?

Indefinitely so long as the trademark holder is actively defending it

Trademark holders must worry about genericization of their trademark—losing it because the trademarked name has become the generic name for the product. Which of the following products has lost its trademark in the United States?

Aspirin

Suppose that you're hiking in the woods and there's an unexpected snowstorm. You're cold, hungry, and lost, and it's getting dark. If you stay outside, you might freeze to death overnight. You notice a small cabin, with no one in it. You try the door but it's locked. You break the lock, take some food, light a fire in the fireplace, and sleep in one of the beds. In the morning, the owners come to the cabin and call the police. Which of the following is true, based on the ruling in Ploof v. Putnam?

You can't be charged with trespassing but you do need to reimburse the owners for damages.

In the case of Boomer v. Atlantic Cement Co., the Court ruled for the neighbors and ordered Atlantic Cement Co. to pay them permanent damages, paid as servitude to the land. What does this mean?

Atlantic Cement Co. has paid damages and it allowed to continue its nuisance behavior in perpetuity. If a homeowner sells his/her home to a new person, the new neighbor is NOT allowed to collect damages from Atlantic.

What is the term for the government's right (in most countries) to seize property from a private landowner if the owner doesn't want to sell?

Eminent domain

Which of the following is the least likely to be interesting from an economic perspective?

After an accident occurs, how much will the injurer have to pay the victim for damages?

What two legal traditions, combined, cover more than 90% of the world's population?

Common and Civil Law

What does it mean if an economist says a good is a "public good"?

It non-rivalrous and non-excludable

Which of the following describes transitive preferences?

I like cake better than pie, and pie better than ice cream, so I also like cake better than ice cream

Which of the following describes complete preferences?

It must be the case that either (1) I like cake better than I like ice cream; (2) I like ice cream better than I like cake; or (3) I like cake and ice cream equally

Which of the following can always be described as "win-win" situations?

Pareto Improvements

Recall the two fox hunting rules: (1) "the guy who established the fox hunt gets the fox, and (2) "the guy who kills the fox gets it." Which of the following is true?

"The guy who established the fox hunt gets the fox," while more complicated to enforce, avoids the incentive to infringe upon other people's hunts (and is thus more efficient).

The "tragedy of the commons" is an example of what phenomenon?

Negative externalities leading to overuse of a resource

Which of the following statements is true?

The normative Hobbes theorem says "Structure the law so as to minimize the harm done by failures in private agreements."

What is loss aversion?

When people are risk-loving with respect to losses and risk averse with respect to gains

Which of the following is a law-and-economics interpretation of the impact of loss aversion?

Plaintiffs may be more likely to settle than defendants (even if both accurately predict their probability of winning at trial)

Which type of intellectual property protection is designed to protect processes or commercial products?

Patents

Which type of intellectual property protection is designed to creative expression?

Copyrights

In order for the government (in the US and most other countries) to seize property from a private landowner if the owner doesn't want to sell, which conditions must be met?

- Must be for the public use
- Must pay the landowner the fair market value

Which of the following is a normative economic statement?

The government should encourage innovation

Which of the following is true?

Injuree (person whose property entitlement was violated) prefers an injunction to damages.

Calabresi and Melamed assert that which of the following is true?

-When transaction costs are low, an injunction is more efficient than damages
-When transaction costs are high, damages are more efficient than injunction

Which of the following is an example of a first possession rule?

- Homestead Act of 1862
- "Guy who kills a fox owns it"
- Fast fish/loose fish

Entitlements can be protected via (among other things), injunctive relief or inalienability. What is the difference between these two concepts?

Under injunctive relief, my entitlement is negotiable (I can choose to sell or give up my right), whereas under inalienability rules, I cannot sell my entitlement.

Which of the following statements on adverse possession is true?

An advantage of adverse possession laws is that these laws clear up uncertainty about ownership over time

Which of the following is the most likely to exhibit negative externalities?

A pig farm that creates a bad odor for several miles in any direction

Which of the following is not a type of transaction cost?

Opportunity cost

Which of the following statements is true?

The normative Hobbes theorem says "Structure the law so as to minimize the harm done by failures in private agreements."

Which of the following is not one of the fundamental economic questions of property law?

What is the socially optimal price of a piece of property?

What is the endowment effect?

When people place a higher value on things they own than they would place on those things if they did not own them

What are the two principles for establishing ownership of fugitive property?

Tied ownership and first possession

How long does a patent for a pharmaceutical currently last in the United States

20 years after filing for the patent

How long does a patent for software currently last in the United States

20 years after filing for the patent