-Mike, Joe, and Sam are roommates. They need lamps for their common living room. Lamps in their living room are a public good for these roommates. The marginal benefit that each individual receives from varying numbers of lamps in the living room is given in the table above. If the marginal cost of a lamp is 13, what is the efficient number of lamps for the roommates to purchase?
A) 2
B) 5
C) 0
D) 1

Question

-Mike, Joe, and Sam are roommates. They need lamps for their common living room. Lamps in their living room are a public good for these roommates. The marginal benefit that each individual receives from varying numbers of lamps in the living room is given in the table above. If the marginal cost of a lamp is 13, what is the efficient number of lamps for the roommates to purchase?
A) 2 
B) 5 
C) 0 
D) 1

Quizplus · Accepted Answer

The efficient number of lamps is where the total marginal benefit equals the marginal cost. Adding the marginal benefits for each lamp from all roommates, the total marginal benefit for the second lamp is 14, which is greater than the marginal cost of 13. For the third lamp, the total marginal benefit is 12, which is less than the marginal cost. Therefore, 2 lamps is the efficient number.

-Mike, Joe, and Sam Are Roommates