INSTRUCTOR DISCUSSION NOTES:
Reduce Corruption by Coordinating Extortionists

1. Why might it be in the best interests of the truck drivers for the checkpoint guards to coordinate their own efforts at taking bribes?

Because when decentralization occurs, total payments made by the truck drivers rose. Increased centralization lowers the average payment made by a given individual.

2. Draw a graph of a monopoly that maximizes its revenue rather than maximizes its profit. Be sure to indicate what you are assuming about marginal cost in this graph.

If the assumption is that MC = 0, then the optimal point will be where MR intersects the horizontal axis.

3. After the number of checkpoints fell, do you think that some checkpoints raised their bribes by more than others? Why or why not?

It seems reasonable to assume that the bribes increased by more nearer to the destinations, again owing to the relative inelasticity of the truck drivers.

Multiple Choice/True False Questions

1. If these individuals are maximizing revenue in setting prices for bribes, then they would also be maximizing profit if marginal cost was

  1. positive.
  2. zero.
  3. Equal to marginal revenue.
  4. B and C
ANS . d

2. How is the elasticity of bribery changing as the distance to the delivery location falls?
  1. Elasticity is falling.
  2. Elasticity is rising.
  3. Elasticity is not changing.
  4. Elasticity is positive.
ANS . a

3. The coordination of decision-making in competitive markets was made illegal in the US under which act?

  1. Sherman Antitrust Act
  2. Glass-Steagal Act
  3. Smoot-Hawley Act
  4. Sarbanes-Oxley Act
ANS . a

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