Table 11-5
A small strip mall contains four retail stores, and crime has recently been on the increase in the neighborhood of the strip mall. The owners of the four stores - Stores A, B, C, and D - are considering contributing to a pool of money that will be used to hire up to 4 security guards. The table represents their willingness to pay, that is, the maximum amount that each store owner is willing to contribute, per day, to hire each security guard.

-Refer to Table 11-5.Suppose the cost to hire each individual guard is $70 per day.How many guards should be hired to maximize the total surplus of the four store owners?

Question

Table 11-5
A small strip mall contains four retail stores, and crime has recently been on the increase in the neighborhood of the strip mall. The owners of the four stores - Stores A, B, C, and D - are considering contributing to a pool of money that will be used to hire up to 4 security guards. The table represents their willingness to pay, that is, the maximum amount that each store owner is willing to contribute, per day, to hire each security guard.
 
-Refer to Table 11-5.Suppose the cost to hire each individual guard is $70 per day.How many guards should be hired to maximize the total surplus of the four store owners?

Quizplus · Accepted Answer

To maximize total surplus, hire guards until the marginal benefit equals the marginal cost. If the cost per guard is $70, hire guards until the additional benefit of hiring one more guard is less than or equal to $70.

Table 11-5 A Small Strip Mall Contains Four Retail Stores, and Crime