As an executive for the Elizabeth Glaser Pediatric AIDS Foundation, you have hired four auditors. The adjacent figure shows your organization's marginal analysis.

Part 2

This number of auditors maximizes your organization's surplus of benefit over cost.

Which of the following statements is not a reason for this?

A.

If more auditors are hired, the marginal cost of each additional auditor is greater than the auditor's marginal benefit, which reduces the total surplus.

B.

At this number, the organization has hired all of the unprofitable auditors and none of the profitable ones.

C.

If fewer auditors are hired, auditors with a surplus of benefit over cost are not employed, which means the total surplus is smaller than otherwise.

D.

The figure shows that four auditors is the quantity that maximizes the organization's surplus because this is the quantity that sets MB equal to

MC.

Part 3

"It is important for you to maximize the surplus of benefit over cost." State whether this statement is true or false and why.

(Select

all that

apply.)

A.

It is false. If the firm is profit maximizing, the total benefit is profit and the firm should maximize this instead.

B.

It is false. If the firm is a nonprofit charity, making a surplus of benefit over cost is not the objective.

C.

It is true. If the firm is profit maximizing, the surplus of benefit over cost is profit.

D.

It is true. If the firm is a nonprofit charity, the surplus benefit can be allocated to the charity's recipients.

$180,000 $150,000 $120,000- MC Marginal benefit and marginal cost ($ per auditor) $90,000 $60,000-. . . . $30,000- MB 0 1 2 3 5 Quantity of auditors