Question

Imagine that you are trying to decide whether to cross a street without using
the designated crosswalk at the traffic signal.
a. What are the expected marginal benefits of crossing? (2)
b. What are the expected marginal costs? (2)
c. How would the following conditions change your benefit–cost equation? What would be the rational
decision in each case and why? (6)
i. The street was busy.
ii. The street was empty, and it was 3:00 A.M.
iii. You were in a huge hurry.
iv. There was a police officer 10 metres away.
v. The closest crosswalk was 1 kilometre away.
vi. The closest crosswalk was 5 metres away.

Answer 1

a) The expected marginal benefits of crossing are;

i. Time can be saved

ii. Elapse the distance to the next closest crosswalk.

b) The expected marginal costs are;

i. Accidents may happen

ii. Will get a fine from a police officer

c) Decision in each case;

    Case i: The street was busy

     In this case the marginal cost will be large as the chances for an accident is high. Decision: not to cross

   Case ii: The street was empty, and it was 3:00 A.M

     In this case the marginal benefit will be large as the chances for an accident is low. It is given that the time is 3am which is early morning and the roads are clear. Which makes it easier to cross the road without a crosswalk. Decision: to cross

   Case iii: You were in a huge hurry

       In this case cost will be large as the chances of crossing the road was high. Decision: to cross

Case iv: There was a police officer 10 metres away

   In this case the marginal cost is large as the chances of getting a penalty or fine is high. Officer at a distance of 10 meters can notice the traffic rule violation and can impose a fine. Decision: not to cross

   Case v: The closest crosswalk was 1 kilometre away

In this case the marginal benefit is high as we can elapse the long distance to the next crosswalk. Decision: to cross

Case vi: The closest crosswalk was 5 metres away

In this case the marginal cost is high as it is better to travel a 5meters than getting to an accident or getting a penalty. Decision: not to cross