A radio manufacturer is experiencing theft problems at its warehouse and has decided to hire security guards to reduce the thefts.The firm wants to minimize the net cost of warehouse thefts. Given the above info,in order to minimize the NET cost of theft,a firm should choose the level of theft prevention at which
A)theft is eliminated.
B)the marginal benefit of theft equals the marginal cost of the theft.
C)the total benefit of theft prevention equals the total cost of the theft prevention.
D)the marginal benefit of theft prevention equals the marginal cost of preventing theft.
E)the total cost of theft prevention equals the total cost of preventing theft.

Question

A radio manufacturer is experiencing theft problems at its warehouse and has decided to hire security guards to reduce the thefts.The firm wants to minimize the net cost of warehouse thefts.  Given the above info,in order to minimize the NET cost of theft,a firm should choose the level of theft prevention at which
A)theft is eliminated. 
B)the marginal benefit of theft equals the marginal cost of the theft. 
C)the total benefit of theft prevention equals the total cost of the theft prevention. 
D)the marginal benefit of theft prevention equals the marginal cost of preventing theft. 
E)the total cost of theft prevention equals the total cost of preventing theft.

Quizplus · Accepted Answer

To minimize the net cost of theft, the firm should choose the level of theft prevention where the marginal benefit of theft prevention equals the marginal cost of preventing theft. This ensures that the firm is spending just enough on theft prevention to offset the potential loss from theft. Choosing any higher level of prevention would result in additional costs that outweigh the benefits, while choosing any lower level of prevention would result in losses from theft that outweigh the savings from lower prevention costs.

A Radio Manufacturer Is Experiencing Theft Problems at Its Warehouse