You are considering planting a garden of beautiful flowers in your front yard. It would cost you $45 in time and materials to plant it. You would get $40 worth of benefits from the garden and your neighbor, who walks by your front yard every day, would get $10 worth of benefits from it. Which statement is TRUE?
A) Your private benefits exceed your private costs, so you would plant the garden.
B) The efficient equilibrium is to not plant the garden, but you would do so anyway since the social benefits exceed your private costs.
C) The efficient equilibrium is to plant the garden, but you would not do so since your private costs exceed your private benefits.
D) The external benefits are not significant enough to affect the efficiency of this equilibrium.

Question

Quizplus · Accepted Answer

In this scenario, your private costs of planting the garden ($45) exceed the private benefits you would receive ($40). Even though your neighbor would receive $10 worth of benefits, it is not enough to offset the difference. Therefore, the efficient equilibrium would be for you not to plant the garden, and choosing not to plant it would also be the best choice for you.

You Are Considering Planting a Garden of Beautiful Flowers in Your