In the absence of government interference, there is a constant marginal cost of $5 per ounce for growing marijuana and delivering it to buyers.If the probability that any shipment of marijuana is seized is .30 and the fine if a shipper is caught is $35 per ounce, then the equilibrium price of marijuana per ounce is

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The equilibrium price is the price at which the quantity supplied equals the quantity demanded. In this case, the quantity supplied is determined by the marginal cost of production, which is $5 per ounce. The quantity demanded is determined by the price of marijuana and the probability of being caught and fined. The expected cost of being caught is $35 * .30 = $10.50 per ounce. Therefore, the equilibrium price is the price at which the marginal cost of production plus the expected cost of being caught equals the price of marijuana. This price is $5 + $10.50 = $15.50 per ounce.

In the Absence of Government Interference, There Is a Constant