b) "Does political corruption erode civic values and foster dishonest behavior? I test this hypothesis in the context of Mexico by combining data on local government corruption and cheating on school tests. I find that, following revelations of corruption by local officials, secondary students' cheating on cognitive tests increases significantly. The effect is large and robust and persists for over a year after malfeasance is revealed. These findings are validated by evidence from individual survey data, which documents that individual interviewed right after corruption is revealed report being less honest, less trustworthy, and more prone to thinking that cheating is necessary to succeed, compared to similar individuals interviewed just beforehand."

Ajzenman, N. (2021). The power of example: corruption spurs corruption. American Economic Journal: Applied Economics 31(2): 230-257.

i) Referring to the abstract above, discuss how theory that you have learned in Microeconomics III can be applied to explain the presented problem. (17 markah/marks)

ii) Let say that the punishment for corruption misconduct is to be fined by not less than 5 times bribery amount or RM10,000, whichever higher. How the findings of this study can be used to suggest amount of fine that take into consideration the damage inflicted on the society? (5 markah/marks)