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Consider the unilateral precaution model presented in class and in CU. SC=social cost; w=cost of each unit of precaution; x=amount of precaution I take; p(x)=probability accident happens as a function of precaution; A=constant cost associated with an accident Let SC = wx + p (x)A Cooter and Ulen tell us the cost minimizing function is w= -p'(x)A Unlike Cooter and Ulen, let's assign a real functional form to the probability function: p (x) = 1 - √x where permissible values for x satisfy: 0 ≤ x ≤ 1. Solve the social planner (SP) problem (minimize total social cost of an accident) to find the efficient level of precaution, x*, as a function of w and A. Solve the victim's problem under a rule of "no liability"; define the victim's optimal level of precaution as xvNL Solve the victim's problem under a rule of "strict liability" with perfect compensation (D = A); define the victim's optimal level of precaution as xvSL Repeat parts 2 and 3 for the injurer (i.e., find xiNL and xiSL). Compare your answers in 2 - 4. to the efficient level of precaution, x*, that you found in part 1. Which liability rule induces the victim to take positive precaution? Which liability rule induces the injurer to take positive precaution? Under what circumstances should the law prescribe "no liability"? How about "strict liability"?
The value of cross price elasticity of demand between goods A and B is 0.75, while the cross price elasticity of demand between goods A and C is -1.38. Characterize A &B and A & C as substitutes or complements.
How does your consumption of the two goods change? How does your response depend on income and substitution effects? Can you afford the bundle of soda and pizza you consumed before the price changes?
Provide your opinion as to whether Fundamentals Drive Markets or does Confidence Drive Markets. Fundamentals determine employment, employment determines profits, and profits determine the stock price. Confidence determines wealth, wealth determines d..
consider the cobb douglass utility function ux y x16y56 of a typical student. x denotes time spent studying and y
Presume a firm sells to senior citizens and others at a single price of $10. At this price it sells 10,000 units total (2,000 to seniors; 8,000 to others). It estimates that at the $10 price, seniors have an elasticity of -3 while others have an elas..
Who has the absolute advantage at producing Cigar and who has the comparative advantage at Bourbon and who is specializing in Bourbon according to Comparative Advantage now?
Question on vertical integration
according to a study of u.s. cigarette sales between 1955 and 1985 when the price of cigarettes was 1 higher
imagine a large multinational firm producing consumer products which announces to cut 20000 thousand jobs close 100
What part of the change in consumption is due to the income effect and what part is due to the substitution effect - Draw the highest indifference curve that she can attain in red ink, and label the point that she chooses as A.
How much aluminum oxide and how much carbon are needed to prepare 644 g of aluminum by the balanced chemical reaction (below) if the reaction proceeds to 78.8% yield?
m.d. einstein is considering what she should do for the rest of her life.she is considering becoming a brain surgeon.
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