8. Best responses for individual contributions to a public good Manuel and Poornima each rent one unit of a two-unit apartment building. The building has two separate furnaces located between the two apartments. The renters each control and pay for the heat their furnaces generate and would choose to increase the temperature of their apartments by 45 degrees if the other never turned on their furnace, given that the marginal private benefit (MB) of the 45th degree is equal to the marginal cost (MC) of 1 degree of heat (assume that the MC of heat is constant and that the MB of heat is decreasing). However, each degree of heat paid for by one not only raises the temperature in that apartment by a degree but also raises the temperature in the other apartment by half a degree. As a result, if Poornima were to buy 40 degrees of heat, then Manuel would need to purchase only marginal benefit of the final degree was equal to the marginal cost. Use the blue line (circle symbol) to plot Manuel's best-response function (BRF) on the following graph, with the total amount of heat he will buy on th vertical axis as a function of the total amount Poornima buys (horizontal axis). (Hint: Manuel's response to Poornima's purchase noted previously represents one point on the line, and the response when Poornima purchases 0 degrees of heat will be the vertical intercept.) Then, use the orange line (square symbol) to plot Poornima's best-response function, with the total amount she will buy (horizontal axis) as a function of the total amount Manuel buys (vertical axis). Finally, place the black point (plus symbol) on the graph to indicate the Nash equilibrium amount of heat each person will purchase, given the other's equilibrium choice. Note: Dashed drop lines will automatically extend to both axes. HEAT BOUGHT BY MANUEL 100 90 80 70 60 50 40 30 20 10 0 0 10 + 20 30 50 60 70 HEAT BOUGHT BY POORNIMA O True 40 False 80 90 100 O Manuel's BRF -0 Poornima's BRF Nash Equilibrium Suppose the government is worried about the low temperatures and wants to increase heat consumption. (?) degrees of heat before his personal True or False: The current Nash equilibrium is efficient; therefore, any government intervention would result in an inefficient level of heat.