Posted: March 7th, 2017

Suppose that Sam and Bill live on the same street. In the winter, both of them like the snow on their street to be plowed. Bill s demand is given by Q=40 P and Sam s demand is given by Q=30 2P. Suppose that the marginal cost of plowing the snow is constant at $35.

Suppose that Sam and Bill live on the same street. In the winter, both of them like the snow on their street to be plowed. Bill s demand is given by Q=40 P and Sam s demand is given by Q=30 2P. Suppose that the marginal cost of plowing the snow is constant at $35.
a) What is the social marginal benefit
b) What is the socially efficient amount of plowing that should be done?
c) What is the socially efficient amount pf plowing that should be done if the marginal cost of plowing were $5?