Let the inverse demand curve for a dangerous product be given by
P = 20 – Q. Also, let the constant marginal cost
of production be equal to $5, the constant probability of an
accident be equal to .01, and the resulting harm equal to $1,000.
Suppose the market is perfectly competitive.
What is the equilibrium level of output under a rule of no
liability? (Please enter a whole number.)
What is the equilibrium price under no liability? (Enter a whole
number.)
What is the equilibrium level of output under strict liability?
(Enter a whole number.)
What is the equilibrium price under strict liability? (Enter a
whole number.)
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