Assignment Questions -

Q1. Twenty first Century Electronics has discovered a theft problem at its warehouse and has decided to hire security guards. The firm wants to hire the optimal number of security guards. The following table shows how the number of security guards affects the number of radios stolen per week.

a. If each security guard is paid $200 a week and the cost of a stolen radio is $25, how many security guards should the firm hire?

b. If the cost of a stolen radio is $25, what is the most the firm would be willing to pay to hire the first security guard?

c. If each security guard is paid $200 a week and the cost of a stolen radio is $50, how many security guards should the firm hire?

Q2. U.S. Supreme Court Justice Stephen Breyer's book Breaking the Vicious Circle: Toward Effective Risk Regulation examines government's role in controlling and managing the health risks society faces from exposure to environmental pollution. One major problem examined in the book is the cleanup of hazardous waste sites. Justice Breyer was extremely critical of policymakers who wish to see waste sites 100 percent clean.

a. Explain, using the theory of optimization and a graph, the circumstances under which a waste site could be made "too clean." (Good answers are dispassionate and employ economic analysis.)

b. Justice Breyer believes that society can enjoy virtually all the health benefits of cleaning up a waste site for only a "small fraction" of the total cost of completely cleaning a site. Using graphical analysis, illustrate this situation. (Hint: Draw MB and MC curves with shapes that specifically illustrate this situation.)

Reading Assignment -

Please read the following online articles that discuss raising the speed limit on highways in UK and Canada and some of the issues involved in it:

Ministers to consult on 80mph motorway speed limit

Editorial: It's time for Canada to increase highway speed limits

http://www.bbc.co.uk/news/uk-politics-15116064

http://www.macleans.ca/society/life/b-c-is-going-to-let-drivers-go-120-kmh-on-some-highways-the-rest-of-canada-needs-to-get-up-to-speed/

Question:  Do you think the current highway speed limit in Canada is appropriate? How would you decide whether or not it should be increased or decreased?

Focus: Application of the cost/benefit principle to try to find an optimal speed limit for road traffic

Issues and comments:

• Discussion should try to identify the costs and benefits of changing the speed limit
• Discuss the issue of what costs and benefits should be included (i.e., we should probably weigh costs and benefit from societal perspective also)
• Use the discussion to highlight the differences between the total costs and marginal costs and between the total benefits and marginal benefits at different speed limits
• Data collection and coming up with any equation is not part of this exercise, so do not sweat these details.

Attachment:- Assignment File.rar