2. An injurer in a tort situation is deciding how much precaution to take. The cost of precaution and the expected (social) cost of accidents is given in the following table: 0 1 2 3 Cost of precaution Cost of accidents 0 200 3 100 6 50 9 25 12 20 15 2 18 0 (a) What is the socially efficient level of precaution? (b) What is the amount of precaution that the injurer would choose under a negli- gence rule if the standard of due care I was set at In = 5? How about In = 4? What does this say about mistakes in setting the standard of due care? (Hint: Calculate private costs under each value of J (C) Now suppose that damages are biased upward, so when an accident occurs and the injurer is liable, he must pay 1.1 times the actual amount of the harm. Will the injurer take the efficient level of care? Explain, either by doing some (simple) calculations or through careful verbal explanation with a graph. (d) Now suppose that there is uncertainty in the standard of due care. Specifically, with probability 1/2 the court will find that the standard of due care is In = 4, and with probability 1/2 the court will find that standard is In 6. What is the expected private cost if the injurer chooses I = 4? How about I = 6? What does this say about the effect of uncertainty on precaution? (e) Is there a negligence rule which could mitigate this effect in part (a)? Explain briefly