Suppose That the Marginal Benefit of Having a Security Guard

question 120

Multiple Choice

Suppose that the marginal benefit of having a security guard at the airport is MB₁,at the bank is MB₂,and at the mall is MB₃.The marginal cost of assigning security guard is the same for all three places,and it is represented by MC₂.
Suppose all three locations hire the efficient number of guards,and that the marginal cost of having a security guard equals his or her wage.Efficiency would also require that

• A) all security guards be paid the same wage regardless of where they work.
• B) more security guards be hired at the location at which marginal cost is lowest.
• C) more security guards would be hired at the location at which marginal cost is greatest.
• D) security guards at the airport be subsidized because private markets will under-provide them.

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Definitions:

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, measured in terms of the number of finished units those in-process items represent.

Motion Pictures

A category of visual art form that uses moving images to tell stories or convey information, often accompanied by sound.

Process Cost System

An accounting system used to track costs in industries where production is continuous and processes are uniform, assigning costs to units of output.

Equivalent Units

A concept used in cost accounting to convert partially completed goods into a number of complete units of output.