Reference no: EM132681524

Answer each of the following questions in a short composition.

1. Richie Rich, a millionaire, and Penny Poor, a welfare recipients, are both at high risk for automobile accidents. Richie owns a fast sports car, and he likes to drag race iti with his friends on the weekends. Penny has a small junker that has an extra powerful engine, which she regularly tests as she speeds to her part-time job everyday. Auto liability is not compulsory in the state. Explain why penny might have less incentive to purchase liability insurance than Richie.
2. Christopher is an avid bicycle enthusiast. He participates in ride the Rockies, a popular bike race in the Colorado mountains. During the race, he slips on some gravel when going down a hill at 50 miles per hour and is thrown from his bike. His bike helmet cracks and he has serious head injuries. If he survives, under what theories can he sue the bike helmet manufacture?
3. stink Inc, has a factory which emits air pollutants which could have long-term effects on the environment and also smell terrible. This reduces the values of surrounding property. Stinky has estimated that the cost of installing anti-pollution devices is $500,000. fines are imposed by the EPA foe exceeding limits on certain types of emission but these are only $1000 per year. Considering liability rules, transaction cost and information availability, analyze the optimality the anti-pollution devices.