Marginal Benefit from Additional Streetlights Dave and Art live in a new housing

Question

Marginal Benefit from Additional Streetlights 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 S6. 1. If Dave had to pay for streetlights on his own, how many streetlights would there be? a)0 b)1 c)2 d)3 2. What is the socially optimal number of streetlights that should be installed in the neighborhood? a)1 b)2 c)3 d)4

Explanation / Answer

Ans:

1. C = 2

If dave had to pay for streetlights on his own , 2 streetlights would there be.

2. C = 3

the socially optimal number of streetlights that should be installed in the neighborhood = 3 .

Quantity of street lights in the Neighborhood Dave's Individual Marginal Benefit Art's Individual Marginal benefit 0 1 $15 $20 2 10 15 3 5 10 4 2 3

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