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Assume That an Additional $50,000 in Benefits Will Be Received

question 125

Essay

Assume that an additional $50,000 in benefits will be received each year if a town hires an additional police officer whose only job would be to catch drivers who drive over the speed limit on its only street.What must the additional cost of this additional police officer be to make this hiring economically rational?


Definitions:

Shares

Shares represent an ownership stake in a company or financial asset, entitling the holder to a proportional share of profits, distributed as dividends, if announced.

No-par Common Stock

Shares issued without a specified face value, allowing the company flexibility in setting their price.

Stated Value

A value assigned to no-par stock by the board of directors of a company, used as the basis for capital accounts in the shareholders' equity section of the balance sheet.

Par Preferred Stock

A type of preferred stock that has a nominal face value and is entitled to dividends before any dividends can be issued to common stockholders.

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