The Three Firms Shown Below Can Choose Among Three Workplace

question 25

Multiple Choice

The three firms shown below can choose among three workplace safety alternatives: continue with the status quo,provide safety training or purchase new safety equipment.The injury rates for the firms under the three alternatives as well as the costs of the alternatives are shown in the table.The cost of treating an injury is $200. $\begin{array}{cccc}& \text { Status Quo } & \text { Safety Training } & \text { New Safety Equipment } \\\underline { \text { Firm } } & \underline { 7 \text { injuries } } & \underline { 6 \text { injuries } } & \underline { 5 \text { injuries } } \\\mathrm{A} & 0 & \$ 100 & \$ 700 \\\mathrm{~B} & 0 & \$ 50 & \$ 600 \\\mathrm{C} & 0 & \$ 200 & \$ 500\end{array}$
Suppose the government requires all three firms to install the new safety equipment.Relative to the status quo,the marginal cost would be _______ and the marginal benefit would be ______.

• A)$2150;$1200
• B)$1450;$600
• C)$1800;$1200
• D)$1800;$1800

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Definitions:

Price-leadership Model

An economic concept where one or more dominant firms set their prices, and other, smaller firms in the industry then follow by setting the same or similar prices.

Dominant Firm

A company that holds a large portion of the market share within its industry, exerting significant influence or control over market conditions, including prices and product offerings.

Oligopoly

A market structure in which a small number of firms have the large majority of market share.

Cournot Model

An economic model used to describe an industry structure in which companies compete on the amount of output they will produce, which they decide independently of each other and at the same time.