Suppose that you are an otherwise law-abiding college professor earning $80,000 a year. Suppose further that you are confronted with the opportunity to steal a painting worth an estimated $350,000 on the black market. You know full well that if you get caught and convicted, you could face a prison sentence of 10 years plus a fine of $5,000. The estimated arrest rate in your state for such crimes is 25% while the conviction rate is around 80%. (a) Calculate your expected MB and MC. Assuming that you are a rational thief, would you steal the painting? (b) All Else Equal, what would the jail sentence have to be to make you indifferent between stealing the painting and not? (c) All Else Equal, what would the fine have to be to make you indifferent between stealing and not stealing? (d) All Else Equal, what would the joint probability of arrest and conviction [probability of arrest x probability of conviction] be to make you indifferent?

Suppose that you are an otherwise law-abiding college professor earning $80,000 a year. Suppose further that you are confronted with the opportunity to steal a painting worth an estimated $350,000 on the black market. You know full well that if you get caught and convicted, you could face a prison sentence of 10 years plus a fine of $5,000. The estimated arrest rate in your state for such crimes is 25% while the conviction rate is around 80%. (a) Calculate your expected MB and MC. Assuming that you are a rational thief, would you steal the painting? (b) All Else Equal, what would the jail sentence have to be to make you indifferent between stealing the painting and not? (c) All Else Equal, what would the fine have to be to make you indifferent between stealing and not stealing? (d) All Else Equal, what would the joint probability of arrest and conviction [probability of arrest x probability of conviction] be to make you indifferent?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter16: Information, Risk, And Insurance

Section: Chapter Questions

Problem 7RQ: What are some ways a seller of labor (that is, someone looking for a job) might reassure a possible...

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