PAM 3410: Economics of Consumer Law Spring 2011 PROBLEM SET #3 - 130 Points Due April 18 1) Assume New York accident law is governed by a rule of...

PAM 3410: Economics of Consumer Law(see attachment)1) Assume New York accident law is governed by a rule of simple negligence. Six Flaggs Darien Lake Amusement Park in Rochester New York must decide how many inspections of their new roller coaster (Superman) they should run each day. More inspections are costly because fewer customers can participate and the line is longer to get onto the ride. This causes Six Flaggs to generate less revenue (fewer people come back to the amusement park). The profits associated with each level of inspections is provide in the table below. As you can see more inspections have some value in that they reduce the probability of an accident. Inspection per DayProfitsProbability of AccidentExpected Accident LossesOnce$175,000.90$90,000Twice$130,000.30$30,000Three$80,000.20$20,000After Each Ride$50,000.10$10,000