9:46 * 39%. \" Back mmM Apply Ch1-4.cdf aA 2. Driving Speed and Speed Limit. Sup

Question

9:46 * 39%. " Back mmM Apply Ch1-4.cdf aA 2. Driving Speed and Speed Limit. Suppose that for the typical driver, the marginal benefit of driving speed is constant at MB = 5 utils per mph. As speed increases, the expected cost associated with an accident increases at an increasing rate, and the marginal cost of speed is MC(s)-s/12, where s is miles per hour a. In the absence of a speed limit, the marginal principle is satisfied with a speed of s- I mph. ustrate b. Suppose the city will enforce a 36 mph speed limit by imposing a fine that increases with the gap between the observed speed and the legal speed limit. The fine is $f for 37 mph, $2f for 38 mph, $3f for 39 mph, and so on. The city enforces the speed limit with cameras, so every speeder pays the fine To ensure that the typical driver observes the speed limit, the fine per mph over the limit is f $L C. ]. Illustrate traffic cam eras are banned, and the city switches to motorcycle officers to enforce the speed limit. The probability of being caught speeding and paying the fine is 1/10. To ensure that the typical driver observes the speed limit, the fine per mph 1. Illustrate. FlipView["verify numbers", "a. 60 b. $2 Background - LightBlue, FrameMargins -> 5] a. 60 b. $2 c. 20 3. Equimarginal Principle in the Factory. A firm has a fixed number of workers to allocate to thee

Explanation / Answer

Marginal analysis involves a cost-versus-benefits comparison of various business activities. In marginal analysis, the cost of an activity is measured against incremental changes in volume to determine how the overall change in cost will affect the bottom line of a business. Marginal analysis can show the cost of additional production by a business all the way up to the break-even point. This is generally the maximum cost that a business can sustain without losing money.

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