As an executive for the Elizabeth Glaser Pediatric AIDS Foundation, you have hired the number of auditors that sets the marginal benefit of auditing your firm equal to its marginal cost. Explain why this number of auditors maximizes your organization's surplus of benefit over cost. Draw an illustration similar to the one shown to support your answer. Explain why it is important for you to maximize the surplus of benefit over cost.

Transcribed Image Text:

Marginal benefit and marginal cost (dollars per unit) $60 $50 $40 A C $30 $20 D $10 B MC MB 1 0 10 20 30 40 50 60 70 Action (unit) Marginal benefit and marginal cost (dollars per unit) $60 $50 $40 A C $30 $20 D $10 B MC MB 1 0 10 20 30 40 50 60 70 Action (unit)