Now, Imagine that the city of SAn Francisco decides to crack down on motorists w

Question

Now, Imagine that the city of SAn Francisco decides to crack down on motorists who park on sidewalks by increasing the number of officiers issuing parkings ticket (thus, raising the probability of a ticket.) If the cost of a ticket is $100 and the opportunity cost for the average driver of seraching for parking is $ 12, which of the following proabilites would make the average person stop parking illegally? Assume that people will not park illegally if that expected value of doing so is negative.

Check all that apply. 17% 10% 13% 19%

Alternatively, the city could hold the number of officers cosntant and discourage parking violations by raising the fine for illegal parking. Suppose the average probability of getting caught for parking illegally is currently 10% citywide and the average opportnuity cost of parking is , again $12.The fine that would make the average person indifferent between searching for parking and parking illegally is ____ ,assuming that people will not park illegally if the expected value of doing so is negative

Explanation / Answer

As the opportunity cost for the average driver of searching for parking is $12, so drivers will not park illegally if the average cost of parking illegally is more than $12.

As the ticket costs $100, if the probability of getting caught is more than 12%, drivers will not park illegally as the expected value of doing so will be negative (100 X 13% = $13, 12-13=-$1)

So they would not park illegally if the probability of getting caught is 13% or 17% or 19%.

If the average probability of getting caught for parking illegally is currently 10% citywide and the average opportnuity cost of parking is , again $12. The fine that would make the average person indifferent between searching for parking and parking illegally is $120.

calculation:

Let ticket cost at which average person will be indifferent = c

So. 10% of C = 12

C=$120

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