Four stores have a problem with theft and security is a public good.Let S stand for the number of person-hours of security patrols per week.The marginal benefit of security patrols to each of the stores is given by the formula MB = 200/(1 + S).Patrols cost $25 per hour.Which of the following gives the marginal social benefit function?
A) MSB = 50/(1 + S)
B) MSB = 4 + [200/(1 + S)]
C) MSB = 800/(1 + S)
D) MSB = [200/(1 + S)] - 4

Question

Quizplus · Accepted Answer

The marginal social benefit (MSB) is the sum of the marginal benefits (MB) of all four stores. Since each store has an MB of 200/(1 + S), the MSB for all four stores combined is 4 * [200/(1 + S)] = 800/(1 + S).

Four Stores Have a Problem with Theft and Security Is