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Now, imagine that port chester decides to crack down on motorists who park illegally by increasing the number of officers issuing parking tickets (thus, raising the probability of a ticket). If the cost of a ticket is $100, and the opportunity cost for the average driver of searching for parking is $25, which of the following probabilities would make the average person stop parking illegally? assume that people will not park illegally if the expected value of doing so is negative. Check all that apply.

Sagot :

Based on the fact that people will not park illegally if the expected value is negative, the probabilities that would make people stop parking illegally are 26% and 31%.

What are the expected values of the given probabilities?

Expected value can be found as:

= -(Cost of ticket x Probability) + Opportunity cost of searching for parking

Probability of 26%                                                       Probability of 31%

= -(100 x 26%) + 25                                                    =  -(100 x 31%) + 25      

= -$1                                                                            = -$6

Probability of 23%                                                       Probability of 21%

= -(100 x 23%) + 25                                                    =  -(100 x 11%) + 25      

= $2                                                                            = $4

The probabilities that are negative are: 26% and 31%.

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