hello. these are some practice questions that needs answering
if you can answer them comprehensively, showing work when needed, you will make 500fg no questions asked.
ignore this post if you see it 24 hours after it was made.
thanks for your help!
happy holidays
1.Jongha is a good bee keeper and he can make high quality honey. If his friend Subsub invests $100, Jongha can double the money. Clearly the net profit will be $100 and Subsub will get a net profit of $60, while Jongha will get $40. They have made a legal contract so that Jongha should guarantee Subsub $60 net profit if Jongha ever breaches the contract. We will assume that the probability that Jongha will breach the contract is P.
After the contract Subsub planted a lot of apple trees near by the bee keeping place without telling Jongha. Subsub thought that he can use the bees to pollinate the apple trees so that he can save $40. If Jongha breaches the contract Subsub will get a loss of $200 in his apple farming business. This is a reliance.
Let’s assume that x is the compensation that Jongha has to pay Subsub for the loss in the apple farming business(=reliance), when Jongha breaches the contract. What would be the socially efficient level of x? Please explain your answer mathematically. (20 points)
2. Give two examples when the government should not enforce a contract and explain the reasons briefly. (10 points)
3. Consider the case of Coke in a bottle and Coke in a can which we dealt with in the class. Explain why it might be better for the court to use the strict liability when the consumers do not have to necessary information to deal with the risk. You have to use an example with numbers on the production cost, probability of accident, the damage from the accident.
4. Assume that Chung and Don signed a contract and accordingly Chung has invested some of his money to Don’s business. Then Chung has also invested in a reliance without telling Don. We will assume that the reliance was not foreseeable to Don. Use an example with numbers and explain why Don should not compensate for the loss from the reliance when he breaches the original contract.