MICROECONOMICS-ACCESS CARD <CUSTOM>
MICROECONOMICS-ACCESS CARD <CUSTOM>
11th Edition
ISBN: 9781266285097
Author: Colander
Publisher: MCG CUSTOM
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Chapter 22, Problem 26QE
To determine

Determine assumptions.

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The consumer theory and the expected utility theory are two theories. Give a policy recommendation on how individuals decision making is affected in each theory.
Economics Consider a potential criminal with a lawful income of $121. Potential loot from robbery is $75. The probability of being caught and imprisoned is 0.50 and a prison term for this type of crime is 0.33 units of time. Round to one decimal place in all calculations. Utility is given by: Utility = (income)1/2   A. Calculate the guaranteed utility from lawful income and the expected utility of committing the crime. What will the potential criminal do? Explain why. Would your answer change if there were an anguish cost of 1 util involved? Explain. B. Suppose all the information given above holds true, except there is no anguish cost. You are a city official who has some extra room in the budget to dedicate towards fighting crime. For the use of these resources, you can choose between either increasing the length of prison term for criminals to 0.595 units of time or investing in GIS technologies and improved policing strategies that will increase the probability of criminals being…
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