Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from provinces trying to recover the health- care related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses). Provincial prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without obtaining at least one cigarette firm study. Each firm has been presented with an opportunity to lower their liability in the suit if they cooperate with attorneys representing the provinces. Firm B Concede that cigarette smoke causes lung cancer Argue that there is no evidence that smoke causes cancer Firm A Concede that cigarette smoke causes lung cancer Firm A loss=-$20 Firm B loss =-$15 Firm A loss=-$5 Firm B loss = $50 Argue that there is no evidence that smoke causes cancer Firm A loss = $50 Firm B loss = $5 Firm A loss = Firm B loss = $10 $10

Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from provinces trying to recover the health- care related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses). Provincial prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without obtaining at least one cigarette firm study. Each firm has been presented with an opportunity to lower their liability in the suit if they cooperate with attorneys representing the provinces. Firm B Concede that cigarette smoke causes lung cancer Argue that there is no evidence that smoke causes cancer Firm A Concede that cigarette smoke causes lung cancer Firm A loss=-$20 Firm B loss =-$15 Firm A loss=-$5 Firm B loss = $50 Argue that there is no evidence that smoke causes cancer Firm A loss = $50 Firm B loss = $5 Firm A loss = Firm B loss = $10 $10

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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