Figure 5-8 Amit and Bree are the only two homeowners on an isolated private road.Both agree that installing street lights along the road would be beneficial and want to do so.Figure 5-8 shows their willingness to pay for different quantities of street lights,the market demand for street lights and the marginal cost of installing the street lights.
-Refer to Figure 5-8.How much is Bree willing to pay to have 4 street lights installed?

Question

Figure 5-8  Amit and Bree are the only two homeowners on an isolated private road.Both agree that installing street lights along the road would be beneficial and want to do so.Figure 5-8 shows their willingness to pay for different quantities of street lights,the market demand for street lights and the marginal cost of installing the street lights.
-Refer to Figure 5-8.How much is Bree willing to pay to have 4 street lights installed?

Quizplus · Accepted Answer

Bree's willingness to pay for 4 street lights is $1,800, which is where her demand curve intersects with the market supply curve. This is the most efficient outcome as it maximizes total surplus (the difference between the total willingness to pay and the total cost of installation). Installing more than 4 street lights would result in decreasing marginal benefit and increasing marginal cost, reducing total surplus.

Figure 5-8 Amit and Bree Are the Only Two