A small neighborhood is considering hiring a security firm to patrol the neighborhood. Ten families in the neighborhood would each get a marginal benefit of MB = 10 - h, where h is daily hours of patrol. The marginal cost of patrol is constant at $20 per hour. What is the socially optimal number of patrol hours?
A) 12
B) 16
C) 8
D) 20

Question

Quizplus · Accepted Answer

The socially optimal number of patrol hours is found where the total marginal benefit (TMB) equals the marginal cost (MC). For ten families, TMB = 10(10 - h) = 100 - 10h. Setting TMB equal to MC gives 100 - 10h = 20. Solving for h gives h = 8.

A Small Neighborhood Is Considering Hiring a Security Firm to Patrol