1. “Dams ‘R’ Us” operates a major hydropower dam on the Klamath River in Oregon. In the event of dam failure, there would be major damages to local communities. The company can reduce the probability of failure through proper maintenance of the facility. The marginal cost of maintenance is increasing in the amount of maintenance done (and thus decreasing in the probability of an accident). We can write this marginal cost curve as MC=2000-2250p (where 0
2. What is the efficient probability of dam failure?
3. If “Dams ‘R’ Us” thinks that, in the event of dam failure, they will NOT be found liable for damages, what probability of failure will they choose?
4. If “Dams ‘R’ Us” thinks that, in the event of dam failure, they will have to pay the full cost of those damages, what probability of failure will they choose?
5. If “Dams ‘R’ Us” thinks that, in the event of dam failure, there is only a 50% chance that they would be held liable for the damages, what probability of dam failure would they choose?

Answer rating: 100% (QA)

1 The efficient probability of dam failure is 2 2 Dams R Us thinks that in the event of dam failure ... View the full answer