4.3 Suppose that courts begin imposing higher fines on appliance companies that manufacture products that occasionally malfunction
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4.3 Suppose that courts begin imposing higher fines on appliance companies that manufacture products that occasionally malfunction and harm consumers. Appliance companies can make expenditures that decrease the likelihood of malfunctioning. Does the change in the court’s behavior change the expected marginal benefit of avoiding an accident or the marginal cost of avoiding an accident? What happens to the rate of product malfunctions?
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