Exam_II_-_KEY - I. Torts [50 points] y Key B C 1) [20...

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I. Torts [50 points] 1) [20 points] Consider the graph shown here, depicting joint levels of care taken by the potential victim of and potential injurer in an accident. Here x denotes the level of care taken by the potential victim and y denotes the level of care taken by the potential injurer. The levels x* and y* are efficient levels of care, and we assume the courts consider levels above these sufficient to demonstrate exercise of due care by the victim or injurer. Complete the table below. Liability: For each legal standard enter The quadrant(s) which have levels of joint care for which the victim must pay for damages done versus the quandrant(s) with levels of joint care for which the injurer must pay for damages done. Activity : enter “YES” if the indicated party has incentive to engage in an efficent level of activity, “NO” if otherwise. Care: enter “YES” if the indicated party has incentive to exercise (at least) due care, “NO” if otherwise. 2) [30 points] Explain your answers regarding levels of activity and care assumed by both parties for: Strict Liability: Liability Activity Care Victim pays in Quadrants Injurer pays in Quadrants Exercised by Victim? Exercised by Injurer? Exercised by Victim? Exercised by Injurer? Zero Liability A,B,C,D - YES NO YES NO Strict Liability - A,B,C,D NO YES NO YES Strict Liability with Contributory Negligence Defense A,B C,D NO YES YES YES Negligence B,C A,D YES NO YES YES Negligence with Contributory Negligence Defense A,B,C D YES NO YES YES x* y y* x* A B C D If an accident occurs the potential injurer is liable for damages, regardless of levels of care taken by the victim. The potential victim has no incentive to exercise care. Nor does he have incentive to consider expected costs due to an accident when deciding on a level of activity. He will engage in greater levels of activity than is efficient. The potential injurer will exercise care to reduce the probability of an accident, and his/her expected damages. She will also weigh, at the margin, the expected benefit and social costs (including those due to accident) when considering activity. “Key
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I. Torts (Continued) Strict Liability with Contributory Negligence Defense: Negligence: If we add a contributory negligence defense the victim has incentive to exercise at least due care. At this level care any damages due to accident must be paid by the injurer. So long as the potential victim exercises due care, however, he no longer has incentive to consider the expected cost of an accident in deciding on levels of activity. The potential injurer knows she will most likely be liable for damages due to accident, given the incentives facing potential victims. She has incentive to exercise care AND weigh both expected marginal benefits and social costs (including those due to the accident when deciding on a level of activity. The potential victim knows that potential injurers have
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This note was uploaded on 03/18/2011 for the course ECON 415 taught by Professor Holland during the Spring '09 term at Purdue University-West Lafayette.

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Exam_II_-_KEY - I. Torts [50 points] y Key B C 1) [20...

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