Oxford Research Encyclopedia of Economics and Finance
Tort law is part of the common law that originated in England after the Norman Conquest and sprea... more Tort law is part of the common law that originated in England after the Norman Conquest and spread throughout the world, including to the United States. It is judge-made law that allows people who have been injured by others to sue those who harmed them and collect damages in proper cases. Since its early origins, tort law has evolved considerably and has become a full-fledged “grown order,” like the economy, and can best be understood by positive theory, also like the economy. Economic theories of tort have developed since the early 1970s, and they too have evolved over time. Their objective is to generate fresh insight about the purposes and the workings of the tort system. The basic thesis of the economic theory is that tort law creates incentives for people to minimize social cost, which is comprised of the harm produced by torts and the cost of the precautions necessary to prevent torts. This thesis, intentionally simple, generates many fresh insights about the workings and eff...
Assume the cartel (or monopoly) price of a particular good, Pm, is $2 per unit, and the competiti... more Assume the cartel (or monopoly) price of a particular good, Pm, is $2 per unit, and the competitive price, Pc, is $1. At the cartel output, Qm, let the marginal cost of supplying additional output equal $0.70 per unit. One additional unit would be worth $2 to consumers and would cost only $0.70 to produce. (That cost is less than the assumed competitive price of $1 because marginal cost will typically rise as output increases.) The difference between the value of the good to the consumer and the cost of making it is lost. As output increases from Qm to Q. this loss per unit decreases because the value of additional units to consumers declines
Oxford Research Encyclopedia of Economics and Finance
Tort law is part of the common law that originated in England after the Norman Conquest and sprea... more Tort law is part of the common law that originated in England after the Norman Conquest and spread throughout the world, including to the United States. It is judge-made law that allows people who have been injured by others to sue those who harmed them and collect damages in proper cases. Since its early origins, tort law has evolved considerably and has become a full-fledged “grown order,” like the economy, and can best be understood by positive theory, also like the economy. Economic theories of tort have developed since the early 1970s, and they too have evolved over time. Their objective is to generate fresh insight about the purposes and the workings of the tort system. The basic thesis of the economic theory is that tort law creates incentives for people to minimize social cost, which is comprised of the harm produced by torts and the cost of the precautions necessary to prevent torts. This thesis, intentionally simple, generates many fresh insights about the workings and eff...
Assume the cartel (or monopoly) price of a particular good, Pm, is $2 per unit, and the competiti... more Assume the cartel (or monopoly) price of a particular good, Pm, is $2 per unit, and the competitive price, Pc, is $1. At the cartel output, Qm, let the marginal cost of supplying additional output equal $0.70 per unit. One additional unit would be worth $2 to consumers and would cost only $0.70 to produce. (That cost is less than the assumed competitive price of $1 because marginal cost will typically rise as output increases.) The difference between the value of the good to the consumer and the cost of making it is lost. As output increases from Qm to Q. this loss per unit decreases because the value of additional units to consumers declines
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