Question
Bad Betty works as a clerk in a store that sells toilet paper and hand sanitizer. During a virus outbreak the store sells out. This
Bad Betty works as a clerk in a store that sells toilet paper and hand sanitizer. During a virus outbreak the store sells out. This gives Betty the alternative of stealing some of the stock and selling it on the internet. Ordinarily Betty is paid $15 per hour. Alternatively, she can earn $30 per hour if she steals. However, if she is caught, she will be fired and have to work for $10 per hour installing fire alarms. Betty works 50 hours per week and can allocate her time to honest selling or stealing. Given the indifference curves on Figure 3 below, you predict that she will earn _________ per week if not convicted and spend _________ hours in legal sales.
b. reconsider the previous problem with the following additional assumptions. Assume that Bad Betty is risk neutral and that the probability of being caught and convicted of stealing is 0.5. Now what will she do? Show your reasoning carefully.
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