Author Question: Suppose 100 citizens each derive marginal benefit from submarines according to the function MB = 10 ... (Read 117 times)

sdfghj

  • Hero Member
  • *****
  • Posts: 552
Suppose 100 citizens each derive marginal benefit from submarines according to the function MB = 10 - Q. If subs cost 100 each to produce, what is the efficient quantity of submarines?
 
  What will be an ideal response?

Question 2

Suppose three neighbors must vote on the installation of a traffic light that costs 210. The cost of the light will shared by all three. Voter A values the light at 50; voter B values the light at 50; and voter C (who drives the most) values the light at 200. If the voting rule is that the majority wins, does the light get purchased? Is it efficient to purchase the light?
 
  What will be an ideal response?


peter

  • Sr. Member
  • ****
  • Posts: 330
Answer to Question 1

The market demand is SMB = 1000 - 100Q. Setting this equal to the MC of 100 yields a quantity of 9. If the cost is shared equally, each citizen pays 1 for the ninth submarine, which they each value at 1.

Answer to Question 2

The cost of the light to each voter is 70. Since MC > MB for two of them, the light does not get purchased. It is efficient to purchase the light since SMB = 300 which exceeds the MC of 210.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

The B-complex vitamins and vitamin C are not stored in the body and must be replaced each day.

Did you know?

Fewer than 10% of babies are born on their exact due dates, 50% are born within 1 week of the due date, and 90% are born within 2 weeks of the date.

Did you know?

More than 50% of American adults have oral herpes, which is commonly known as "cold sores" or "fever blisters." The herpes virus can be active on the skin surface without showing any signs or causing any symptoms.

Did you know?

One way to reduce acid reflux is to lose two or three pounds. Most people lose weight in the belly area first when they increase exercise, meaning that heartburn can be reduced quickly by this method.

Did you know?

There used to be a metric calendar, as well as metric clocks. The metric calendar, or "French Republican Calendar" divided the year into 12 months, but each month was divided into three 10-day weeks. Each day had 10 decimal hours. Each hour had 100 decimal minutes. Due to lack of popularity, the metric clocks and calendars were ended in 1795, three years after they had been first marketed.

For a complete list of videos, visit our video library