In the Absence of Government Interference, There Is a Constant

question 47

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 .10 and the fine if a shipper is caught is $25 per ounce, then the equilibrium price of marijuana per ounce is

• A)$8.33.
• B)$7.50.
• C)$30.
• D)$4.50.
• E)$5.50.

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Definitions:

Recoverable Amount

The higher value between an asset's fair value minus costs of disposal and its value in use.

Carrying Amount

The amount at which an asset or liability is recognized on the balance sheet after deducting any accumulated depreciation, amortization, or impairment.

Fair Value

An estimate of the price at which an asset or liability would be traded between knowledgeable, willing parties in an arm's length transaction.

Costs To Sell

The direct costs attributable to the disposition of an asset, excluding finance costs and income taxes.