Project #159195 - Econ Question

Business Tutors

Subject Business
Due By (Pacific Time) 12/07/2016 10:00 am

read a short article and answer three questions.

link for this article: http://www.npr.org/sections/money/2011/12/05/142634542/why-burn-doctors-hate-instant-soup.

Questions:

              a)   Explain   in   principle   how   you   would   determine   whether   the   companies   are   meeting  their  standard  of  care  in  the  design  of  the  soup  packaging.

              b)   What   additional   information   would   you   need   to   make   a   definitive   determination  of  the  appropriate  standard  of  care

              c)   Supposing   the   consumers   are   unable   to   make   an   accurate   assessment   of   the   risks   from   the   soups,   would   you   favor   a   negligence   rule   or   a   strictly   liability   standard  for  claims  for  injury  from  the  soup? 

              d)  Now  assume  that  only  the  firms  know  the  risk  abatement  costs  (their  own  costs   and   those   of   the   other   firms)   while   the   (external)   social   costs   of   injuries   are   publicly   known.   Explain   how   an   authority   could   implement   a   mechanism   that   would  identify  the  socially  optimal  level  of  care.

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