A Manufacturer of Wood Chippers Estimates That the Probability of a Fatal

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The Answer is The manufacturer's estimated death cost per wood chipper is: $2,000,000 × (1/40,000) = $50.The cost of changing the design is $60 per wood chipper.Since the estimated death cost is less than the cost of changing the design, the manufacturer will not change the design.The true death cost per wood chipper is: $2,000,000 × (1/30,000) = $66.67.The cost of changing the design is $60 per wood chipper.Since the true death cost is greater than the cost of changing the design, the benevolent social planner would advise the manufacturer to change the design.

A Manufacturer of Wood Chippers Estimates That the Probability of a Fatal

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A Manufacturer of Wood Chippers Estimates That the Probability of a Fatal

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