Dave and Art live in a new housing development and would like to have streetligh

Question

Dave and Art live in a new housing development and would like to have streetlights installed to illuminate the streets and sidewalks at night. The table shows Dave and Art's individual marginal benefits for different quantities of streetlights that could be installed in the neighborhood. Suppose that the marginal cost of installing a streetlight is $6. If Dave had to pay for streetlights on his own, how many streetlights would there be? 0 1 2 3 What is the socially optimal number of streetlights that should be installed in the neighborhood? 1 2 3 4

Explanation / Answer

Ans 1

If Dave has to pay n install street lights, he will pay for street lights uptick his marginal be fit is greater than or equal to marginal cost which is 6 here

Here no of lights installed will be equal to 2

After 2 nd light , marginal benefit of 3rd light is less than marginal cost so he will not install 3rd light

C) 2

Ans 2 socially optimum street lights is determined where sum of marginal benefits should be greater than marginal cost

3 street lights will be installed

C) 3

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