A group of risk neutral computer science graduates from Ryerson decide to form a gang to raid bank accounts from local banks. Each gang member agrees to divide the proceeds of crime equally in the amount B = $50,000 per member. The opportunity cost of going to jail is T = $2,000 per month. P is the probability of being caught and convicted. S is the length of jail time measured in months that is imposed as a sentence.

(a)What is the condition that describes when one of these will commit a crime?

(b)Suppose there are 100 gang members and P = 0.15. What is the optimal sentence?

(c)Suppose for every $1 earned by the gang member, there is an additional public social cost of $3. What are the social costs?

(d)Suppose the government, due to political pressure, repeals the mandatory minimum of 14 years, and the average jail sentence is two (2) years.

(e)Suppose 50 of the gang members are irrational(undeterred by the 14-year sentence). What are the social costs?