Hand written solutions are strictly prohibited Problem #1: Dave and Art live in a new housing development and would like to have streetlights installed to illuminatethe streets and sidewalks at night. The table shows Dave and Art's individual marginal benefits for different quantities ofstreetlights that could be installed in the neighborhood. Suppose that the marginal cost of installing a streetlight is $11.Dave has marginal benefits of $15 for 1 streetlight, $10 for 2, $5 for 3, and $2 for 4. Art has marginal benefits of $20 for1, $15 for 2, $10 for 3, and $3 for 4. a. What is the socially optimal number of streetlights to be installed in theneighborhood? b. What is the number of streetlights that will be installed if the decsion is left to each individual (e. g.,if the provision decision is left to the private market)? c. How much surplus will be foregone if the installation decision isleft to the private market?

Marginal Benefit (MB) is the additional satisfaction or utility that a consumer receives when they…

1, $15 for 2, $10 for 3, and $3 for 4. a. What is the socially optimal number of streetlights to be installed in the neighborhood? b. What is the number of streetlights that will be installed if the decsion is left to each individual (e. g., if the provision decision is left to the private market)? c. How much surplus will be foregone if the installation decision is left to the private market?

1, $15 for 2, $10 for 3, and $3 for 4. a. What is the socially optimal number of streetlights to be installed in the neighborhood? b. What is the number of streetlights that will be installed if the decsion is left to each individual (e. g., if the provision decision is left to the private market)? c. How much surplus will be foregone if the installation decision is left to the private market?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Hand written solutions are strictly prohibited

Problem #1: 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 $11.
Dave has marginal benefits of $15 for 1 streetlight, $10 for 2, $5 for 3, and $2 for 4. Art has marginal benefits of $20 for
1, $15 for 2, $10 for 3, and $3 for 4. a. What is the socially optimal number of streetlights to be installed in the
neighborhood? b. What is the number of streetlights that will be installed if the decsion is left to each individual (e. g.,
if the provision decision is left to the private market)? c. How much surplus will be foregone if the installation decision is
left to the private market?

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Step 2: a. Determine the socially optimal number of streetlights to be installed in the neighborhood.

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Step 3: b. Determine the number of streetlights that will be installed if each individual made decision.

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Step 4: c. Determine the surplus foregone if the installation decision is left to the private market.

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