You are an auto manufacturer entering the electric car market. The design and tooling of the vehicle are complete, and production has started. Youwant to sell the car atan affordable price, say $24,000. Recently, however, one of your engineers discovered a design flaw in the vehicle.Hitting a large bump in the road will cause the car to immediately stop. This creates a danger in traffic, whichyou estimate will lead tothree additional deaths per year.Fixing the design flawwill add $2,000 to the cost (and price) of each unit sold.Which of the following options do you choose and why?

a. Wait until the National Highway Traffic Safety Administration (NHTSA) mandates a recall and fix the problem later.

b. Make the repair before each car is produced, even if it affects the shareholder value of the company.

c. Nothing. Adding $2,000 to the price of each car will lead to 500 potential customers being priced out of this market. This creates a loss in overall welfare and an undue burden on those who are now priced out of the market.

d. Nothing. You have estimated that the additional cost per vehicle multiplied by the number of vehicles produced is less than the actuarial (life insurance) value of the three lives lost.