Four stores have a problem with theft and security is a public good.Let S stand for the number of person-hours of security patrols per week.The marginal benefit of security patrols to each of the stores is given by the formula MB = 200/(1 + S).Patrols cost $25 per hour.If each store provided security independently,how much would each store purchase?
A) 15 person-hours of patrols per week
B) 7 person-hours of patrols per week
C) 8 person-hours of patrols per week
D) 16 person-hours of patrols per week

Question

Quizplus · Accepted Answer

Each store would purchase security until its marginal benefit (MB) equals the marginal cost (MC) of $25 per hour. Setting MB = MC, we get 200/(1 + S) = 25. Solving for S gives S = 7 person-hours of patrols per week.

Four Stores Have a Problem with Theft and Security Is