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Nuclear Classmates

Carlos and Mitchell are operating a nuclear power plant in their spare time. They are repairing a broken reactor with some duct tape and Elmer's Glue when a small amount of radiation escapes. It is not deadly, but causes about $100 in damages to everyone in the city with a population of 1 million.

a. Assume the chances of winning at trial are 100%, but the cost of a lawyer is $5,000. Analyze the situation in terms of efficiency, incentives, and outcomes.

b. Can you suggest a solution to this problem? How would it change your answers to part "a"?

c. Assume the chance of winning at trial is 5%. Is there any way that plaintiffs will sue in this situation? What legal remedy could help, and how? Explain.

Business Economics, Economics

  • Category:- Business Economics
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