Use the following to answer question:
-(Table: Security in a Residential Community)Use Table: Security in a Residential Community.Suppose that the residential community has 100 residents.The marginal cost of hiring the second security guard is _____,and the marginal social benefit is _____.
A)$150;$200
B)$450;$1,800
C)$150;$600
D)$450;$600

Question

Use the following to answer question: 
-(Table: Security in a Residential Community)Use Table: Security in a Residential Community.Suppose that the residential community has 100 residents.The marginal cost of hiring the second security guard is _____,and the marginal social benefit is _____.
A)$150;$200 
B)$450;$1,800 
C)$150;$600 
D)$450;$600

Quizplus · Accepted Answer

From the table, we can see that when there is only one security guard, the marginal social benefit is $750 and the marginal cost is $300. When a second security guard is hired, the marginal social benefit increases to $1,350 while the marginal cost increases to $450. Therefore, the marginal cost of hiring the second security guard is $150 ($450-$300) and the marginal social benefit is $600 ($1,350-$750). To determine if hiring the second security guard is optimal, we compare the marginal cost and marginal social benefit. Since the marginal social benefit ($600) is greater than the marginal cost ($150), it is optimal to hire the second security guard. Therefore, the best choice is to hire the second security guard and the answer is C.

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