Suppose that most people will not speed if the expected ne is greater than $200.

Question

Suppose that most people will not speed if the expected ne is greater than $200. Given current
police practices, the probability of being caught speeding is 20%.
a. How high must the actual ne for speeding (what you have to pay if you get a ticket) be to deter most
people from speeding?
b. Suppose the Lexington mayor caps the amount police can ne speeding motorists at $500. The police
vow to step up enforcement in order to cintinue to deter speeding. How high must the probability of being
caught speeding be in order to deter most people from speeding?

Explanation / Answer

a. How high must the actual ne for speeding (what you have to pay if you get a ticket) be to deter mos The expected ne is equal to the probability of being caught times the actual ne, so we have $200 = :2X, or X = $1000. b. Suppose the Lexington mayor caps the amount police can ne speeding motorists at $500. The police vow to step up enforcement in order to cintinue to deter speeding. How high must the probability of being caught speeding be in order to deter most people from speeding? Here, $200 = p $500, or p = :4. Police must catch speeders 40% of the time to deter most speeders.

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