The figure below shows the marginal benefit of hiring a security guard at the airport (MB_A)_, the bank (MB_B) and City Hall (MB_C). The marginal cost of hiring a security guard is the same at all three places and is given by MC. If each place hires the socially optimal number of security guards, the marginal benefit of the last security guard hired at each place will be the: A)same at all three places. B)highest at the airport. C)highest at the bank. D)highest at City Hall.

Question

Quizplus · Accepted Answer

The socially optimal number of security guards is where the marginal benefit equals the marginal cost, which occurs at the points where the marginal benefit curves intersect the marginal cost curve. From the graph, we can see that the socially optimal number of security guards is the same at all three places, where the marginal cost crosses the marginal benefit curves. Therefore, the marginal benefit of the last security guard hired at each place will be the same, and the answer is A) same at all three places.

The Figure Below Shows the Marginal Benefit of Hiring a Security