Suppose Oscar and Felix share an apartment. Oscar likes to leave his dirty dishes in the sink, and this really bothers Felix. When Oscar leaves his dirty dishes in the sink, Oscar's surplus from their living arrangement is $400 per month, and Felix's surplus is $300 per month. On the other hand, when Oscar does not leave his dirty dishes in the sink, Oscar's surplus from their living arrangement is $350 per month, and Felix's surplus is $325 per month. There are no rules or regulations that prevent Oscar from leaving his dishes in the sink. In this case, the socially optimal outcome can be achieved:
A)if Felix gives Oscar $25 per month to stop leaving his dishes in the sink.
B)if Felix gives Oscar $50 per month to stop leaving his dishes in the sink.
C)if Felix gives Oscar more than $75 per month to stop leaving his dishes in the sink.
D)without any intervention.

Question

Quizplus · Accepted Answer

It is socially optimal for Oscar to leave his dishes in the sink because total economic surplus is higher when he leaves his dishes in the sink ($400 + $300 = $700)compared to when he does not ($350 + $325 = $675). Since Oscar's surplus is higher when he leaves his dishes in the sink ($400 > $350), and there are no rules or regulations that prevent Oscar from doing so, no further action is required to achieve the socially optimal outcome.

Suppose Oscar and Felix Share an Apartment