Twentyfirst Century Electronics has discovered a theft problem at its warehouse and has decided to

Twentyfirst Century Electronics has discovered a theft problem at its warehouse and has decided to hire security guards. The firm wants to hire the optimal number of security guards. The following table shows how the number of security guards affects the number of radios stolen per week.

Number of security guards              Number of radios stolen per week

0                                                                  50

1                                                                  30

2                                                                  20

3                                                                  14

4                                                                    8

5                                                                    6

  

1. If each security guard is paid $200 a week and the cost of a stolen radio is $25, how many security guards should the firm hire?
2. If the cost of a stolen radio is $25, what is the most the firm would be willing to pay to hire the first security guard?
3. If each security guard is paid $200 a week and the cost of stolen radio is $50, how many security guards should firm hire?

 

Thomas, C. & Maurice, S. (2011). Managerial economics: Foundations of business analysis and strategy              (10th ed.). New York: McGraw-Hill