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 13. of the following statements are true? (Assume risk neutral drivers.) If the probability of detection with the extra police officer is 10%, then a a) speeding ticket should cost $55. If the probability of detection with the extra police officer is 10%, then a b) speeding ticket should cost $500. If the probability of detection with the extra police officer is 100%, then no one will speed. If the probability of detection with the extra police officer is 90%, then a speeding ticket should cost $59 None of the above c) d) e)

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 13. of the following statements are true? (Assume risk neutral drivers.) If the probability of detection with the extra police officer is 10%, then a a) speeding ticket should cost $55. If the probability of detection with the extra police officer is 10%, then a b) speeding ticket should cost $500. If the probability of detection with the extra police officer is 100%, then no one will speed. If the probability of detection with the extra police officer is 90%, then a speeding ticket should cost $59 None of the above c) d) e)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.8P

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