Suppose that speeding imposes externalities on other people resulting in a social cost of $50. A town is considering hiring an extra police officer to give out speeding tickets. If we want to maximize social welfare (absent enforcement costs), which of the following statements are true? (Assume risk neutral drivers.) a) If the probability of detection with the extra police officer is 10%, then a speeding ticket should cost $55. b) If the probability of detection with the extra police officer is 10%, then a speeding ticket should cost $500. If the probability of detection with the extra police officer is 100%, then no one c) will speed. d) If the probability of detection with the extra police officer is 90%, then a speeding ticket should cost $59 e) None of the above
Suppose that speeding imposes externalities on other people resulting in a social cost of $50. A town is considering hiring an extra police officer to give out speeding tickets. If we want to maximize social welfare (absent enforcement costs), which of the following statements are true? (Assume risk neutral drivers.) a) If the probability of detection with the extra police officer is 10%, then a speeding ticket should cost $55. b) If the probability of detection with the extra police officer is 10%, then a speeding ticket should cost $500. If the probability of detection with the extra police officer is 100%, then no one c) will speed. d) If the probability of detection with the extra police officer is 90%, then a speeding ticket should cost $59 e) None of the above
Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter22: Frontiers Of Microeconomics
Section: Chapter Questions
Problem 6PA
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