Asked by Oscar Gordillo on Jul 17, 2024
Verified
You spend $150 every month planting flowers in your front yard. Your neighbor has told you that she derives $20 a month in enjoyment from being able to look at your beautiful flowers. Which of the following is true?
A) You are spending too much on flowers, because your neighbor derives only $20 worth of benefits.
B) You should refuse to spend anything on flowers unless your neighbor pays you $20 a month.
C) If you took into consideration the benefits your neighbor derived, the efficient level of flower planting would be greater than $150 a month.
D) If you took into consideration the benefits your neighbor derived, the efficient level of flower planting would be less than $150 a month.
Efficient Level
The optimal point of production or operation where a firm or an economy can produce goods at the lowest cost and with the best allocation of resources.
- Comprehend how externalities contribute to changes in social costs, benefits, and production efficiency levels.
Verified Answer
EL
Erick LopezJul 24, 2024
Final Answer :
C
Explanation :
The efficient level of flower planting would be greater than $150 a month if you considered the external benefits your neighbor derives from enjoying the view of your flowers, in addition to your own benefits. This is because the total benefit to society (you and your neighbor) from the flowers exceeds your personal cost.
Learning Objectives
- Comprehend how externalities contribute to changes in social costs, benefits, and production efficiency levels.