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Q: True, False, or Uncertain. If the marginal costs of precaution do not rise with the level of precaution taken, the efficient level of precaution (X*) will be less than if the marginal costs of precaution increase with the level of precaution taken? What if accidents costs decrease with precaution? All else held equal, how does this affect the efficient level of precaution? Explain.

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The optimal quantity of precaution is investigated.

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The optimal quantity of precausion will be at the point where marginal cost is equal to marginal benefits. If the marginal costs of precaution do not rise with the level of precaution taken, we have the horizontal curve for the marginal cost of precaustion instead a rising curve. Since curve for marginal benefits of precaution ...

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