II. (Public Good) Two residents develop their communal area into a community garden. The marginal benefit of each resident i = 1,2 from the garden is given by MB₁ 100 - Q and MB₂ = 60-Q, where Q is the size of the garden in m². The cost of developing the communal area into a garden is C(Q) = 80Q. Assume that the community garden is non-rivalry and non-excludable. 1) Calculate the total marginal benefit from the garden as a function of Q. What is the optimal size of garden. What is the benefit of the garden to each resident?
II. (Public Good) Two residents develop their communal area into a community garden. The marginal benefit of each resident i = 1,2 from the garden is given by MB₁ 100 - Q and MB₂ = 60-Q, where Q is the size of the garden in m². The cost of developing the communal area into a garden is C(Q) = 80Q. Assume that the community garden is non-rivalry and non-excludable. 1) Calculate the total marginal benefit from the garden as a function of Q. What is the optimal size of garden. What is the benefit of the garden to each resident?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:II. (Public Good) Two residents develop their communal area into a community garden.
The marginal benefit of each resident i = 1,2 from the garden is given by MB₁ =
100-Q and MB₂ = 60-Q, where is the size of the garden in m². The cost
of developing the communal area into a garden is C(Q) = 80Q. Assume that the
community garden is non-rivalry and non-excludable.
1) Calculate the total marginal benefit from the garden as a function of Q. What is
the optimal size of garden. What is the benefit of the garden to each resident?
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