Scenario: Alexander and Vanessa Two individuals, Alexander and Vanessa, benefit from scientific research.Alexander's marginal private benefit from such research is given by the equation P = 200 - Q, where Q refers to the amount of research undertaken and P is the price Alexander is willing to pay for such research.Vanessa's marginal private benefit from such research is given by the equation P = 100 - Q.Suppose the marginal social cost of engaging in such research is constant at $100.
(Scenario: Alexander and Vanessa) Given the information in the scenario Alexander and Vanessa, what is the socially optimal amount of scientific research for this economy?
A)60
B)300
C)100
D)200

Question

Quizplus · Accepted Answer

In a socially optimal situation, the marginal social benefit should be equal to the marginal social cost. Given that the marginal social cost of engaging in such research is constant at $100, and the total marginal benefits are the sum of the individual marginal benefits, we can find the socially optimal quantity of scientific research by setting the sum of the individual marginal benefits equal to the marginal social cost:

(200-Q) + (100-Q) = 100

Solving for Q gives Q = 100. Therefore, the socially optimal amount of scientific research for this economy is 100 units.

Scenario: Alexander and Vanessa Two Individuals, Alexander and Vanessa, Benefit