A construction company needs to move lumber onto the roof of a building. If the lumber falls and hits someone it will cause $1,200,000 in damage. Assume that company must choose between the following levels of precaution:Spend $500 and the probability of an accident is .05Spend $5,000 and the probability of an accident is .01Spend $8,000 and the probability of an accident is .008Spend $10,000 and the probability of an accident is .003If the construction company is strictly liable for the costs of the accident, how much would they spend on precaution?A. $500B. $5,000C. $8,000D. $10,000

P(A) denotes the probability of accident.Damage caused by accident = $1,200,000The amount paid for…

Answered: A construction company needs to move…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

A construction company needs to move lumber onto the roof of a building. If the lumber falls and hits someone it will cause $1,200,000 in damage. Assume that company must choose between the following levels of precaution:

Spend $500 and the probability of an accident is .05
Spend $5,000 and the probability of an accident is .01
Spend $8,000 and the probability of an accident is .008
Spend $10,000 and the probability of an accident is .003

If the construction company is strictly liable for the costs of the accident, how much would they spend on precaution?

A. $500

B. $5,000

C. $8,000

D. $10,000

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 6 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions