A Small Neighborhood Is Considering Hiring a Security Firm to Patrol

question 26

Multiple Choice

A small neighborhood is considering hiring a security firm to patrol the neighborhood. Ten families in the neighborhood would each get a marginal benefit of MB = 10 - h, where h is daily hours of patrol. The marginal cost of patrol is constant at $20 per hour. What is the socially optimal number of patrol hours?

• A) 12
• B) 16
• C) 8
• D) 20

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Definitions:

Industry Demand Curve

A graphical representation that shows the relationship between the price of a good or service and the total quantity demanded by all consumers in the industry.

Explicit Costs

Explicit costs are direct, out-of-pocket payments for expenses like wages, rental fees, and materials, clearly identifiable and recorded in a company's financial statements.

Perfect Competition

A theoretical market structure characterized by a complete absence of rivalry among the sellers and perfect knowledge among buyers and sellers, with the product being homogeneous.

Price Makers

Entities that have the ability to influence the price of goods and services in the market due to lack of competition or unique product offerings.