Problem
Let the inverse demand curve for a dangerous product be given by P = 20 - Q. Also, let the constant marginal cost of production be equal to $5, the constant probability of an accident be equal to .01, and the resulting harm equal to $1,000. Suppose the market is perfectly competitive.
What is the equilibrium level of output under a rule of no liability? (Please enter a whole number.)
What is the equilibrium price under no liability? (Enter a whole number.)
What is the equilibrium level of output under strict liability? (Enter a whole number.)
What is the equilibrium price under strict liability? (Enter a whole number.)
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.