Marty, a Musician, Frequently Plays at Large Parties and Nightclubs

question 23

Multiple Choice

Marty, a musician, frequently plays at large parties and nightclubs. Marty has musical equipment worth $8,000, and he takes precautions to prevent theft. The marginal benefit of these precautions is given by MB = 60 - 3A, where A is the number of precautions Marty takes. The marginal cost of preventing theft (i.e., the time, energy, and effort expended) is given by MC = 2A. Suppose Marty purchases full insurance that pays him $8,000 if his gear is stolen. What is Marty's optimal level of precautions?

• A) 0
• B) 2
• C) 5
• D) 20

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