In a Certain City, the Demand Function for Crack Cocaine

question 3

Multiple Choice

In a certain city, the demand function for crack cocaine is q = 1,000 - p, where p is the street price.The cocaine industry is competitive.Cocaine distributors can buy as much cocaine as they wish at a price of $50 per unit from Colombian sources.Whenever the city narcotics police catch a cocaine dealer, they confiscate all the cocaine that he has.The jails are full so they do not imprison the dealers.The police are able to catch the dealers about half the time, so they get about half the cocaine that enters the city.Instead of destroying confiscated crack, the police simply resell it on the street.If the original supply curve of cocaine on the streets was horizontal, what is the net effect of police activities on the market for crack in this city?

• A)The amount purchased on the street is about 50 units smaller than it would be with no enforcement.
• B)There is no effect, since all of the drugs reach consumers anyway.
• C)Crack dealers will stop dealing in this city altogether, since they can make more money elsewhere.
• D)The amount of crack purchased on the street decreases by about half.
• E)The quantity purchased by dealers rises to make up for the amount that is confiscated.

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Definitions:

Prosperous Economy

Characterizes an economic state with significant growth, wealth, and good living conditions for its populace.

Hierarchical Control

A method of management where decision-making authority is distributed on a graded scale from top-level management down to lower levels.

Organizational Design

The process of structuring an organization's roles, responsibilities, and systems to achieve its goals efficiently and effectively.

Particular Organizational Design

A unique configuration of an organization's structures, processes, and systems designed to achieve its goals and address specific challenges.