-The above figure shows the payoff to two firms in an industry deciding to make an investment in worker safety.Neither firm will make the investment because
A) each can benefit from the other firm incurring the costs.
B) there is no benefit to making the investment.
C) each firm pays for the other firm's investment.
D) society does not care about worker safety.

Question

-The above figure shows the payoff to two firms in an industry deciding to make an investment in worker safety.Neither firm will make the investment because
A) each can benefit from the other firm incurring the costs. 
B) there is no benefit to making the investment. 
C) each firm pays for the other firm's investment. 
D) society does not care about worker safety.

Quizplus · Accepted Answer

Each firm has an incentive to avoid the costs associated with the investment, hoping to benefit from the other firm's investment in worker safety. This is a classic example of a free-rider problem, where each firm prefers to benefit from the investment without incurring the costs themselves.

-The Above Figure Shows the Payoff to Two Firms in an Industry