Illustrate what if accidents costs decrease with precaution

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Q. Let w is marginal cost of precaution, x is level of precaution, p(x) is probability of an accident and A is accident losses. *Assume unilateral precaution. True, False or Uncertain. If marginal cost of precaution do not rise with level of precaution taken, efficient level of precaution (X*) will be less than if marginal costs of precaution increase with level of precaution taken. Illustrate what if accidents costs decrease with precaution? Explain how does this affect efficient level of precaution? Explain.

Reference no: EM1371105

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