1 For a common resource such as fish, the marginal private benefit of an additio
ID: 1194966 • Letter: 1
Question
1 For a common resource such as fish, the marginal private benefit of an additional boat is the ________ and the marginal social benefit is the ________. A) quantity of fish that one boat can catch; change in the total catch from an additional boat B) change in the total catch from an additional boat; change in the total catch from an additional boat C) catch per boat; quantity of fish that one boat can catch D) change in the total catch from an additional boat; catch per boat
People in Petroville commonly own an oil reserve. Each person has the right to drill a well an take oil from the reserve. The table above shows how the amount of oil produced depends on the number of wells. The marginal cost of a well is the equivalent of 36 barrels of oil. What is the marginal private benefit if 24 wells are used?
52 barrels
160 barrels
36 barrels
4 barrels
Number of wells Oil(barrels per month) 8 672 16 1,088 24 1,248 32 1,152 40 800
Explanation / Answer
(a) (B)
For a common resource, private marginal benefit and social marginal benefit are same and equal to change in total catch from an additional boat.
(b) (A)
Private marginal benefit (MPB) = Oil barrels / Number of wells
When number of wells is 24, MPB = 1,248 / 24 = 52
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