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2. Consider the economic model of tort liability that we studied in class. Use the following functions for the model. p(x) = 1/vx (that is,
2. Consider the economic model of tort liability that we studied in class. Use the following functions for the model. p(x) = 1/vx (that is, one over a square root of x), where x denotes the injurer's precaution level. w = 5, where w denotes the unit cost of taking precaution A = 10,000 1) Identify the socially efficient level of precaution, x*. Draw a graph to illustrate your answer, 2) Consider the simple negligence rule. a) What level of precaution will the injurer choose if the legal standard of care is set at x*. Draw a graph to illustrate your answer. b) Now assume that the injurer believes that the legal standard of care is set at 0.5x*. Find out the injurer's optimal level of precaution under the simple negligence rule. Draw a graph to illustrate your
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