3. Safeco Manufacturers is considering engineering options to make one of its products safer. Find the optimal safety expenditure for the product using the data on the costs of safety given below. Assume that the courts find a defendant responsible for $100,000 of damages incurred by a victim, consisting of $35,000 in special damages and $65,000 in general damages. (8 points)

Probability of loss .06 .05 .04 .03 .02

Safety Expenditure $0 500 1400 3350 6500

4.Refer to the previous question. Assume that the courts pay $200,000, not $100,000. Find the optimal safety expenditure for the product using the data on the costs of safety given above. 8 points