FE486A – Law and Economics Review topics Exam 2
Chapter 6: An Economic Theory of Torts
1. What is a tort?
2. How are torts externalities?
3. Why does Coasian Bargaining not work?
4. How can law help the Tortfeasor internalize impact on others?
5. What are the 3 requirements for Tort Liability
6. Harm (tangible and intangible).
7. Be able to calculate perfect compensation (with respect to an indifference curve)
8. Causation – must cause actual harm. Be able to use the “but-for test”
9. Breach of Duty – reasonable care taken?
10. Basic Rules: Negligence, Strict Liability, and No Liability. Why are these inefficient?
11. Bilateral precaution vs. unilateral precaution – what is efficient?
12. Efficient Precaution Rules (all 5 – the pop quiz – it shows all 5, yes you have to understand and
remember these).
13. Simple (injurer) negligence. What is efficient level of precaution?
14. Negligence with Defense of Contributory (Victim) Negligence. What is the efficient level of
precaution?
15. Strict Liability with Defense of Contributory (Victim) Negligence. What is the efficient level of
precaution?
16. Strict Liability with Defense of Comparative Negligence[]. What is the efficient level of
precaution?
17. Strict Negligence with Defense of Comparative Negligence[].What is the efficient level of
precaution?
18. Redundant precaution
Chapter 7: Topics in the Economics of Tort Liability
1. Rationality – precaution levels if overstate and understate probability of “bad” outcome
2. Regulation (ex ante vs. liability ex post)
3. Insurance, Bankruptcy, and Litigation costs
4. Vicarious Liability (Strict vs Negligent)
5. Product Liability – different types
6. Computing Damages: Perfect Compensation vs. Risk Equivalence (the role of the probability of
loss)
7. Punitive Damage and enforcement error
Information from writing assignment 5, 6, and 7) and/or videos from class may also appear on the exam.