ECO320Y5- Final Exam Guide - Comprehensive Notes for the exam ( 44 pages long!)

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29 Mar 2018
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For a profit- maximizing firm, the answer depends upon three costs: First, the cost of making the product safer, which depends on its design and manufacture; second, the manufacturer"s legal liability for injuries to consumers; and third, the extent to which injuries discourage consumers from buying the product. The logic of maximizing the comprehensive measure (efficiency) is very similar to the logic of maximizing one of its components (profits). Second, we predict the consequences of variations in that implicit price. Finally, we evaluate the effects in terms of efficiency and, where possible, distribution: example 1: white collar crimes, the commission decides that a monetary fine is the appropriate punishment for these offenses, not imprisonment. The commission wants to know, how high should the fine be? : the commission focused on rational crimes that seldom occur unless the expected gain to the criminal exceeds the expected cost.

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