Figure: Market Failure
(Figure: Market Failure) Look at the figure Market Failure.Suppose the supply curve represents the marginal cost of providing street lights in a neighborhood that is composed of two people, Ann and Joe.The demand curve represents the marginal benefit that Ann receives from the street lights.Suppose that Joe's marginal benefit from the street lights is a constant amount equal to AC.If Ann is the only person to pay for the streetlights, how many lights will be provided?
A)0
B)E
C)F
D)G

Question

Quizplus · Accepted Answer

Ann will only consider her own marginal benefit when deciding whether or not to buy street lights. Since her marginal benefit intersects the supply (marginal cost) curve at point F, she will purchase that quantity of street lights. If she purchased any more, the marginal cost would exceed her marginal benefit and she would not purchase them. Therefore, only F street lights will be provided.

Figure: Market Failure (Figure: Market Failure) Look at the Figure Market Failure.Suppose the Market