1) Tort Law and Errors In Judgement [35] Consider a world where actions ofone individual, the injurer, can cause harm to another individual, the victim. Courts can assign liability to the injurer or the victim according to a liability rule as seen in class. If and only if liability is assigned to the injurer by the courts, the injurer must make a transfer to the victim that fully compensate the victim for the harm caused. a) [9] The liability standard is strict liability. 13(32) is the probability of an accident occurring, h is the harm caused to the victim by the accident, and :17 is the level of precaution. Cu: is the cost of precaution. Only the injurer can exert precaution. What is the optimal level of precaution for the injurer? Is it the socially optimal level of precaution? 70) [9] The liability standard is strict liability. Courts will sometimes be wrong and not assign the liability to an injurer that would have been liable under a perfect legal system. The probability of an injurer being found liable in court is 61, p(a:) is the probability of an accident occurring, h is the harm caused by the accident, and (3,, is the cost of precaution. Set up and solve the injurer's problem and compare this outcome with the full information case where 91 = 1 (that is the case from part a)). C) [9] Take the setup from above, and now suppose the defendant can bribe a judge for $b to increase the probability that the judge will rule in their favour so that 61 = 61(1)). Set up and solve the defendant's problem. What inefficiencies are created by the presence of bribery? d) [8] Suppose that the court can specify a level of x, call this 5: over which the injurer is not held liable. Describe the socially optimal level of {E that should be chosen in part a), b) and c)