A Convenience Store Is Considering Renting a Surveillance Camera from a Security

question 114

Multiple Choice

A convenience store is considering renting a surveillance camera from a security company that would prevent $100 in shoplifting per year. The yearly rental rate for the camera is $150. To maximize profits, the firm should

• A) rent the camera because the firm wants to completely eliminate shoplifting.
• B) not rent the camera because the rental rate exceeds the value of shoplifting prevented.
• C) rent the camera if VMP exceeds MRP , but not rent the camera if VMP is less than MRP .
• D) Without knowing the rate of diminishing marginal returns, there is not enough information to answer the question.