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Fireworks accidents continue to put a dark cloud over Independence Day celebrations
Fireworks accidents continue to put a dark cloud over Independence Day celebrations. They seem to happen in about 1% of uses. The average cost of an accident is $1,000. The demand and supply curves for fireworks (exclusive of any accident or legal costs) are given below.
| Demand | Supply | ||
|---|---|---|---|
| Price | Quantity | Price | Quantity |
| $40 | 100 | $8 | 100 |
| $36 | 200 | $10 | 200 |
| $32 | 300 | $12 | 300 |
| $28 | 400 | $14 | 400 |
| $24 | 500 | $16 | 500 |
| $20 | 600 | $18 | 400 |
| $16 | 700 | $20 | 500 |
| $12 | 800 | $22 | 600 |
Suppose that suppliers are strictly liable for accidents. What are the equilibrium price and quantity?
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