Answer Questions Based on the Following Table, in Which

question 39

Multiple Choice

Answer questions based on the following table, in which MBs and MCs are the marginal benefit and marginal cost of safety, respectively. Ps is the probability that a worker will not suffer an injury on the job during a one year period, and is thus a measure of job safety.


$\begin{array}{l}\begin{array}{l}\underline{P}_{s} \\.65 \\.70 \\.75 \\.80 \\.85 \\.90 \\.95\end{array}\begin{array}{c}\underline{MB}_{s}\\{25} \\22 \\19 \\16 \\13 \\10 \\7\end{array}\begin{array}{c}\underline{MC}_{s}\\8\\10 \\12 \\14 \\16 \\18 \\20\end{array}\end{array}$
-If workers underestimate the actual amount of risk associated with the job because of imperfect information,the values in the:

• A)MB_s column will understate the true marginal benefit and the profit-maximizing level of job safety will be less than the optimal level
• B)MB_s column will overstate the true marginal benefit and profit-maximizing level of job safety will exceed the optimal level
• C)MC_s column will overstate the true marginal cost and the profit-maximizing level of job safety will exceed the optimal level
• D)MC_s column will understate the true marginal cost and the profit-maximizing level of job safety will exceed the optimal level

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Definitions:

Issuing Bonds

The process by which a corporation or government raises funds by selling bonds to investors, with the promise to pay back the principal along with interest on specified dates.

Affects

Impacts or influences an outcome, result, or condition.

Common Stock

An equity security that represents ownership in a corporation, entitling holders to vote at shareholder meetings and receive dividends.

Net Cash

The amount of cash available after accounting for cash inflows and outflows over a particular period.