New Normal University Has Found It Necessary to Institute a Crime-Control

question 77

Multiple Choice

New Normal University has found it necessary to institute a crime-control program on its campus to deal with the high costs of theft and vandalism. The university is now considering several alternative levels of crime
Control. This table shows the expected total annual costs and bene?ts of these alternatives.
$$\begin{array} { | l | c | c | } \hline & \begin{array} { c } \text { Total Costs per } \\\text { Year }\end{array} & \begin{array} { c } \text { Total Benefits per Year (reduction in } \\\text { the costs of crime) }\end{array} \\\hline \text { Level One -1 Security Officer } & \$ 20,000 & \$ 80,000 \\\hline \text { Level Two -1 Security Officer with Guard Dog } & 30,000 & 120,000 \\\hline \text { Level Three -1 Security Officer with Guard Dog and Patrol Car } & 40,000 & 140,000 \\\hline \text { Level Four -2 Security Officers with Guard Dog } & 50,000 & 155,000 \\\hline \text { Level Five -2 Security Officers with Guard Dog and Patrol Car } & 60,000 & 160,000 \\\hline\end{array}$$ If New Normal University undertakes program Level Three,

• A) total bene?ts will be less than total costs.
• B) marginal costs will exceed marginal bene?ts.
• C) there would be an underallocation of resources to crime control.
• D) there would be an overallocation of resources to crime control.

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Definitions:

Purchasing Power

Purchasing power denotes the value of currency expressed in the quantity of goods or services that one unit of money can buy, often related to the effects of inflation or deflation.

Inflation

The tempo at which the prevalent prices for goods and services swell, erasing buying effectiveness.

Annual Interest Rate

The percentage of principal charged by the lender for the use of its money, calculated on an annual basis.

Overall Level of Prices

The overall level of prices refers to the average price of goods and services across the economy at a given time.