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M1 ECON 327 - Winter 2007 Midterm 1 Economics of Crime Econ...

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Winter 2007 Economics of Crime Econ. 327 Midterm 1 Version 3 T/F ( 2 points for each correct answer ) 1. According to the handout, by most measures, New Orleans now ranks as the murder capital of the country. 2. Risk-loving offenders have been found to respond more to changes in the severity of punishment than to changes in any other variable. 3. If a behavior is irrational, then increasing its price will have no impact on the quantity of the behavior demanded. 4. The larger is the interest rate that is used to discount, the larger will be the present value of a future payment. 5. Among outcomes with equal expected income a risk-averse individual prefers the least risky. 6. The expected value of punishment is calculated as an average of all possible values of punishment. 7. A change in the wage rate will lead to a decrease in the individual’s supply-of- offenses curve. 8. The most reliable statistics on homicide come from The National Crime Victimization Survey. 9. Equilibrium in the market for offenses can be defined as the crime rate society is willing to tolerate as an indirect consequence of what it is willing to spend for protection. 10. In the short run, a firm that experiences an increase in its fixed costs of security will cut back production. 11. According to theory an increase in the wage rate will lead to a decrease in the quantity of leisure consumed if the substitution effect predominates. 12. An expanding economy will unambiguously increase the supply-of-offenses curve. 13. After the introduction of the automobile the frequency of the crime of bank robbery increased significantly. 1
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14. Boston police found that the majority of rapes in Boston over a given period of time were premeditated. Multiple Choice ( 5 points for each correct answer ) 15. Belinda Bloviator is one of two finalists on the reality program “Survival of the Fittest”. Belinda and her rival are equally matched. The winner will be awarded $2,000,000. Belinda is seriously considering surreptitiously taking a new synthetic human growth hormone which has been universally outlawed and she will be disqualified if it is detected in her blood. The probability of the drug tests finding the hormone in her blood is 1/10. If she chooses to take the dope what is the expected value of her punishment? a. $200,000 b. $2,000,000 c. $100,000 d. $1,000,000 e. $1,800,000
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