A Stand-Up Paddleboard Outfitter Operates Without Insurance

question 91

Essay

A stand-up paddleboard outfitter operates without insurance. The outfitter's marginal cost of safety (e.g., staff training, rescue equipment) is MC_A = 100 + 14A. The marginal benefit of those actions is given by MB_B = 200 - 6A, where A is the number of safety actions taken. The government has mandated that all SUP outfitters carry insurance, leading to a change in the outfitter's marginal benefit curve to MB_B = 140 - 6A. How does this government mandate change the efficient number of precautions taken by the outfitter?

---

Definitions:

Mortise-and-Tenon System

A woodworking or masonry joint that connects two pieces of material through a cutout (mortise) and a projecting piece (tenon) that fits inside the cutout.

Kamakura Period

A period in Japanese history (1185-1333) marked by the rise of the samurai class and the establishment of feudalism.

Sociopolitical Force

A term referring to the influence and interplay of societal and political factors on events and behaviors.

Shogunate

The Japanese military government of the 12th through 19th centuries.