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. $\begin{array}{cccc}
& \text { Status Quo } & \text { Safety Training } & \text { New Safety Equipment } \
\underline { \text { Firm } } & \underline { 7 \text { injuries } } & \underline{ 6 \text { injuries } } & \underline{ 5 \text { injuries } }\
A & 0 & \$ 100 & \$ 700 \
B & 0 & \$ 50 & \$ 600 \
C & 0 & \$ 200 & \$ 500
\end{array}$
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 ______.

Question

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. $\begin{array}{cccc}
& \text { Status Quo } & \text { Safety Training } & \text { New Safety Equipment } \
\underline { \text { Firm } } & \underline { 7 \text { injuries } } & \underline{ 6 \text { injuries } }  & \underline{ 5 \text { injuries } }\
A & 0 & \$ 100 & \$ 700 \
B & 0 & \$ 50 & \$ 600 \
C & 0 & \$ 200 & \$ 500
\end{array}$
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 ______.

Quizplus · Accepted Answer

The marginal cost is the total cost of new equipment minus the status quo cost: $700 + $600 + $500 = $1800. The marginal benefit is the reduction in injury costs: (7-5) * $200 * 3 firms = $1200.

The Three Firms Shown Below Can Choose Among Three Workplace