Asked by Matthew Bahramian on Apr 24, 2024
Verified
(Scenario: Private and External Benefits) Use Scenario: Private and External Benefits.How many hours of lawn upkeep will occur in this community,and what will be the marginal private benefit of such upkeep? Scenario: Private and External Benefits
A small community finds that tidy lawns and neighborhoods provide both private and external benefits.They determine that the marginal private benefit (MPB) of lawns can be represented by the equation MPB = 50 - 0.5Q,where Q is the number of hours spent on keeping lawns tidy.The marginal private cost (MPC) of such lawn upkeep is represented by the equation MPC = 0.5Q,where Q is again the number of hours engaged in lawn upkeep.
A) 50 hours and $50
B) 45 hours and $20
C) 50 hours and $25
D) 100 hours and $50
Marginal Private Benefit
Marginal Private Benefit is the additional benefit or satisfaction received by consumers or producers for consuming or producing one more unit of a good or service.
Marginal Private Cost
The cost incurred by a firm or individual resulting from producing one more unit of a good, excluding externalities or effects on third parties.
External Benefits
External benefits refer to the positive effects or advantages that a product or activity imparts on individuals or society who are not directly involved in the production or consumption of the good.
- Understand the concept of marginal private and social benefits and costs.
Verified Answer
ZK
Zybrea KnightMay 02, 2024
Final Answer :
C
Explanation :
To find the optimal level of lawn upkeep, we need to set the MPB equal to the MPC:
50 - 0.5Q = 0.5Q
Solving for Q:
50 = Q
So, the community will engage in 50 hours of lawn upkeep. To find the marginal private benefit at this level of upkeep:
MPB = 50 - 0.5(50) = $25
So, the marginal private benefit of lawn upkeep is $25. Therefore, the best choice is C.
50 - 0.5Q = 0.5Q
Solving for Q:
50 = Q
So, the community will engage in 50 hours of lawn upkeep. To find the marginal private benefit at this level of upkeep:
MPB = 50 - 0.5(50) = $25
So, the marginal private benefit of lawn upkeep is $25. Therefore, the best choice is C.
Learning Objectives
- Understand the concept of marginal private and social benefits and costs.