Because of a recent wave of jewelry store robberies, a city increases police sur
ID: 1199975 • Letter: B
Question
Because of a recent wave of jewelry store robberies, a city increases police surveillance of jewelry stores. The increase surveillance costs the city an extra $500k per year, but as a result, the amount of jewelry that is stolen falls. Specifically, without the increase in surveillance, jewelry with a retail value of $1 million would have been stolen. This stolen jewelry would have been fenced by the jewelry thieves for $600,000. What is the net social benefit resulting from the police surveillance program?
Explanation / Answer
If we assume the benfit received by theives equally a part of social benefit then the net social benefit is:
1,00,0000-6,00,000-500000 = -1,00,000
There is net social loss of 1,00,000