Hello, Could you please help me with below question? Assume that it costs about

Question

Hello,

Could you please help me with below question?

Assume that it costs about $38,000 a year to keep a prisoner incarcerated and the average prisoner would have caused $30,000 worth of damage to society per year if free. If this estimate is correct, does it make economic sense to build more prisons? (Please pick one answer)

1) No. In reference to the economic issues alone, it does not make sense to build more prisons. The sunk costs of existing prisons exceed the benefits of building more prisons. 2) No. In reference to the economic issues alone, it does not make sense to build more prisons. Assuming that prisons are currently full, the marginal costs of additional prisons are greater than the marginal benefits. 3) Yes. In reference to the economic issues alone, it does make sense to build more prisons. Assuming that prisons are currently full, the marginal benefits of additional prisons are greater than the marginal costs. 4) Yes. In reference to the economic issues alone, although building more prisons will raise the average cost of adding more inmates, the benefit is greater. Because the average costs are less than the average benefit, it makes sense to build more prisons.

Explanation / Answer

The correct answer is Option 2: No. In reference to the economic issues alone, it does not make sense to build more prisons. Assuming that prisons are currently full, the marginal costs of additional prisons are greater than the marginal benefits.

The average cost of building a prison and maintaining a prisoner is both high than when left free. Hence economically it is not advised to build more prisons.

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