Consider the simple model of law enforcement where there are only monetary sanctions, people are risk-neutral, and there is no problem of judgment proofness. Suppose that the probability of detection is affected by the number of law enforcers hired, but that hiring law enforcers generates social costs, according to the following table: # of enforcers Social cost of hiring enforcers Probability of punishing violations 1 $100 0.25 2 $200 0.5 3 $300 0.75 4 $400 1 Suppose further that the social harm associated with the offense of vandalism is $1000 per incident. Which of the following statements is true? A. It is optimal to hire 4 enforcers and impose a sanction of $400. B. It is optimal to hire 4 enforcers and impose a sanction of $1000. C. It is optimal to hire 3 enforcers and impose a sanction of $1000. D. It is optimal to hire 2 enforcers and impose a sanction of $2000. E. It is optimal to hire 1 enforcers and impose a sanction of $4000.
Consider the simple model of law enforcement where there are only monetary sanctions, people are risk-neutral, and there is no problem of judgment proofness. Suppose that the probability of detection is affected by the number of law enforcers hired, but that hiring law enforcers generates
|
# of enforcers |
Social cost of hiring enforcers |
Probability of punishing violations |
|
1 |
$100 |
0.25 |
|
2 |
$200 |
0.5 |
|
3 |
$300 |
0.75 |
|
4 |
$400 |
1 |
Suppose further that the social harm associated with the offense of vandalism is $1000 per incident. Which of the following statements is true?
| A. |
It is optimal to hire 4 enforcers and impose a sanction of $400.
|
|
| B. |
It is optimal to hire 4 enforcers and impose a sanction of $1000.
|
|
| C. |
It is optimal to hire 3 enforcers and impose a sanction of $1000.
|
|
| D. |
It is optimal to hire 2 enforcers and impose a sanction of $2000.
|
|
| E. |
It is optimal to hire 1 enforcers and impose a sanction of $4000.
|
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