In the Absence of Government Interference, There Is a Constant

question 10

Multiple Choice

In the absence of government interference, there is a constant marginal cost of $5 per ounce for growing marijuana and delivering it to buyers.If the probability that any shipment of marijuana is seized is .30 and the fine if a shipper is caught is $35 per ounce, then the equilibrium price of marijuana per ounce is

• A)$22.14.
• B)$40.
• C)$3.50.
• D)$15.50.
• E)$6.50.

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Definitions:

Peach

A type of fruit known for its juicy, sweet flavor and fuzzy exterior.

Lemon

A product, often a used car, that is found to be defective only after it has been bought.

Corolla

The collective term for the petals of a flower, which are usually colored and serve to attract pollinators.

Adverse Selection

A situation where asymmetric information results in high-risk individuals being more likely to engage in agreements, often observed in insurance markets.