An insurance company has found that the severity of property damage in a fire is positively related to the number of firefighters arriving at the scene.
a. Draw a diagram that depicts this finding with number of firefighters on the horizontal axis and amount of property damage on the vertical axis. What is the argument made by this diagram? Suppose you reverse what is measured on the two axes. What is the argument made then?
b. In order to reduce its payouts to policyholders, should the insurance company therefore ask the city to send fewer firefighters to any fire?