Paddy and Mick are the only two inhabitants of a small island off the coast of Ireland. They burn coal to keep their houses warm at night. However, this coal burning is harming the air quality on their island. Both Paddy and Mick could install air filters on their chimneys. These filters cost 50 each. Each filter provides a social benefit of 80, but those benefits are divided equally among Paddy and Mick. If both Paddy and Mick install the filters

Question

Quizplus · Accepted Answer

Both Paddy and Mick will gain 30 because the social benefit of each filter is 80, and the cost of each filter is 50. So, each filter provides a net benefit of 30. Since both Paddy and Mick install the filters, they both gain 30.

Paddy and Mick Are the Only Two Inhabitants of a Small