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) Refer to the information in the scenario Alexander and Vanessa.If the socially optimal level of scientific research is produced and if both Vanessa and Alexander are truthful in disclosing the marginal private benefits they expect to receive from this research, what is the price per unit of research that Vanessa is willing to pay?
A)$0
B)$50
C)$100
D)$300

Question

Quizplus · Accepted Answer

At the socially optimal level, the sum of marginal private benefits equals the marginal social cost. Since Vanessa's marginal private benefit is P = 100 - Q, and at the optimal level, the marginal social cost is $100, Vanessa's willingness to pay is $0 when Q = 100.

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