How can crime and punishment be modeled as a principal-agent problem? What does the model suggest about crime prevention?
What will be an ideal response?
Crime can be viewed as a moral hazard problem. The agent here is the criminal and the principal is the government. The criminal breaks the law but no one may be able to observe the crime. Crime can then be viewed as a problem that can be solved with the right incentives. Incentives will be in part a function of the expected punishment, defined as the product of the probability of detection and the punishment if detected.
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The above figures show the market for hamburger meat. Which figure(s) shows the effect of an increase in the price of a substitute like hot dogs?
A) Figure A B) Figure C C) Figure D D) Figures A and C
How can a warranty at the seller's expense signal that a product is high quality?
What will be an ideal response?
Economic regulation occurs when
a. monopoly is the optimal market structure b. the industry is highly competitive c. the product is important to economic welfare d. the government owns the assets of the industry e. the product price, if left unregulated, would be too low
Gonzo consumes only two things--coke and hot dogs. We can define the addition to "happiness" of consuming an additional coke as the marginal utility of coke and that for hot dogs as the marginal utility of hot dogs. The prices of coke and hot dogs are fixed and Gonzo has a limited budget. To maximize "happiness" subject to his limited budget, Gonzo should purchase coke and hot dogs so that
A. the addition to happiness of the last coke is the same as the addition to happiness of the last hot dog. B. the marginal utility of coke is the same as the marginal utility of hot dogs. C. he spends the same amount on coke as on hot dogs. D. the addition to happiness per dollar spent on coke is the same as the addition to happiness per dollar spent on hot dogs.