Jill sells bouquets made up of flowers that she grows in her backyard. Jill\'s m

Question

Jill sells bouquets made up of flowers that she grows in her backyard. Jill's marginal cost of producing bouquets is given by MC = 0.25Q, where Q is the number of bouquets she makes. Jill can sell all the bouquets she wishes at the local farmers' market for $6 per bouquet. Unfortunately, Jill's floriculture aggravates the allergies of her next-door neighbor, Cooper. Every bouquet that Jill grows produces 50 cents' worth of sneezes.
Jill wants to maximize her profit. Determine the profit-maximizing quantity of bouquets. 24 22 16 26 Jill sells bouquets made up of flowers that she grows in her backyard. Jill's marginal cost of producing bouquets is given by MC = 0.25Q, where Q is the number of bouquets she makes. Jill can sell all the bouquets she wishes at the local farmers' market for $6 per bouquet. Unfortunately, Jill's floriculture aggravates the allergies of her next-door neighbor, Cooper. Every bouquet that Jill grows produces 50 cents' worth of sneezes.
Jill wants to maximize her profit. Determine the profit-maximizing quantity of bouquets. 24 22 16 26

Explanation / Answer

The sneeze generated is an external cost, which should be added to MC to obtained social marginal cost SMC:

SMC = MC + 0.50

SMC = 0.25Q + 0.5

Equating with price,

0.25Q + 0.5 = 6

0.25Q = 5.5

Q = 5.5 / 0.25 = 22

Correct option (b).

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