1. Kala is operating an ATV on the beach. The level of care he chooses influences whether there is an accident in which his ATV harms a sunbather. Kala's cost of exerting care of x is given by wx. That is, Kala has a constant marginal cost of exerting care which is w. The probability of an accident is given by p(r), which is decreasing in x, and the harm imposed on a sunbather in the event of an accident is given by A. (a) Suppose there is an accident, and it turns out that w < -p'(x)A. What does the "Hand Rule, imply about whether Kala was negligent? Explain. (b) Disregard the information in part (a) above. Suppose that A = 1000 and w = 100. Suppose that x must be a whole number between 0 and 5, and the corresponding value of p(x) is given in the table below. For which values of x would the "Hand Rule" imply that Kala is not negligent? p(x) 1 1 .6 2 .4 3 .25 4 .2 5 .17