A manufacturer of wood chippers estimates that the probability of a fatal accident caused by the design of its product is 1/40,000 and the value of a life lost is $2 million. The manufacturer can change the design to eliminate that chance for $60 per wood chipper and is prepared to incorporate all cost-justified precautions. Will the manufacturer change the design? What would the benevolent social planner think about the manufacturer's decision if the true probability of a fatal accident is actually 1/30,000?

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The Answer of A manufacturer of wood chippers estimates that the probability of a fatal accident caused by the design of its product is 1/40,000 and the value of a life lost is $2 million. The manufacturer can change the design to eliminate that chance for $60 per wood chipper and is prepared to incorporate all cost-justified precautions. Will the manufacturer change the design? What would the benevolent social planner think about the manufacturer's decision if the true probability of a fatal accident is actually 1/30,000?

A Manufacturer of Wood Chippers Estimates That the Probability of a Fatal