Question 2 48 pts Consider the following discrete application of a market for a dangerous product. Suppose there are two consumers {A, B) who derive benefits from consuming one unit of a dangerous product. Consumer A derives a benefit of $200, while consumer B derives a benefit of $100. The probability of an accident from consuming this product is 0.01, and the harm from an accident is $5,000. A firm's marginal cost of producing the dangerous product is constant at $75 and the market is perfectly competitive. 1. From a social perspective, is it efficient for consumer A to consume one unit of the dangerous product? Yes 2. From a social perspective, is it efficient for consumer B to consume one unit of the dangerous product? No Suppose that both consumers {A, B] and firms correctly perceive accident risk. They all know the true probability is 0.01. 3. What is the price of the product under no liability? $ 75 4. What is the net benefit of consumption to consumer A under no liability? Incorporate the price revealed in part 3 in addition to expected harm. $ 125 5. What is the net benefit of consumption to consumer B under no liability? Incorporate the price revealed in part 3 in addition to expected harm. $ 25 6. What is the price of the product under strict liability? $ 125 7. What is the net benefit of consumption to consumer A under strict liability? Incorporate the price revealed in part 6. $ 50 V 8. What is the net benefit of consumption to consumer B under strict liability? Incorporate the price revealed in part 6. $ -25 V 9. Recognizing consumption only occurs when the net benefit of consumption is non-negative, which of the following is true? Both no liability and strict li V Now suppose that both consumers {A, B} misperceive the probability of an accident to be 0.001, but firms correctly perceive the probability of an accident to be 0.01. That is, there is consumer misperception of risk. 10. What is the price of the product under no liability? $ 75 11. What is the perceived net benefit of consumption to consumer A under no liability? Incorporate the price revealed in part 10 in addition to perceived expected harm. $ [Select ] 12. What is the perceived net benefit of consumption to consumer B under no liability? Incorporate the price revealed in part 10 in addition to perceived expected harm. $ [Select ] V 13. What is the price of the product under strict liability? $ 125 14. What is the perceived net benefit of consumption to consumer A under strict liability? Incorporate the price revealed in part 13. $ [ Select ] 15. What is the perceived net benefit of consumption to consumer B under strict liability? Incorporate the price revealed in part 13. $ 50 16. Recognizing consumption only occurs when the perceived net benefit of consumption is non-negative, which of the following is true? Strict liability yields the effi V