38-39. In a small and isolated community, there are 25 consumers, each of whom h

Question

38-39. In a small and isolated community, there are 25 consumers, each of whom has the following utility for mosquito control during the summer:* = 30X-1.5X2. where X is the amount of mosquito control purchased in aggregate by members of the community, and U is the utility measured in dollars for each individual when X units of mosquito control are purchased (note that each individual receives benefit from mosquito control, whether of not that individual buys any mosquito control). Mosquito control costs $150 per unit. Questions 38 and 39 concerns this situation 8. The socially optimal level of mosquito control is: A)0 F)5 B) 1 G) 6 E) 40. J) none of the alternatives C) 2 D) 30

Explanation / Answer

U = 30X -1.5X2

Differentiating with respect to X to get mmarginal utility of Individual

Marginal utility = 30-3X

Equating marginal Utility with marginal cost

30-3X = 150

3X = -120

X = -40

So option E is correct.

The Socially otimal level of mosquito control is 40.

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