Question 30 Not yet answered 1 Three hundred senior citizens

Question 30 Not yet answered 1. Three hundred senior citizens live in Golden Years retirement community. They are concerned about public safety and plan public good to all residents. One hundred residents are very concerned about safety another one hundred to hire security guards to patrol their community. The security guards would be a Points ou f 1,00 are somewhat concerned, and the final one hundred are not that concerned at all. The table below shows the marginal benefit of a security guard for each type of resident. P Flag question Security Guards Very Concerned Somewhat Concerned $75 $65 $40 $30 $25 Not So Concerned $80 $70 $60 $50 $35 $50 $40 $30 $20 For example, the marginal benefit of a second security guard is $60 for a \'very concerned\" senior citizen. The cost of hiring a security guard is $9,900. If the Golden Years retirement community decides how many security guards to hire by majority vote and if all residents equally split the cost of any guard they hire, how many guards will be hired and is the outcome efficient. Select one: a. 2, no b, 3,00 c, 4, no

Solution

In an equilibrium, the Marginal Benefit must be equal to marginal cost

Marginal Benefit for hiring one security guard, the total marginal benefit equals = 100(80) + 75(100) + 50(100) = 20,500

Marginal Cost = 9,900

Marginal Benefit for hiring 2 security guards = 100(70) + 65(100) + 40(100) = 17,500

Marginal Cost for hiring 2 guards = 9,900 * 2 = 19,800

For any further number of guards, the marginal cost will always be more than marginal benefit of hiring a guard.

Thus, 2 guards will be hired but the outcome will still not be an efficient one since marginal benefit is less than the marginal cost when 2 guards are hired

Ans. a). 2, no