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Figure: Market Failure
-(Figure: Market Failure) Look at the figure Market Failure. Suppose the supply curve represents the marginal cost of providing streetlights in a neighborhood that is composed of two people, Ann and Joe. The demand curve represents the marginal benefit that Ann receives from the streetlights. Suppose that Joe's marginal benefit from the streetlights is a constant amount equal to AC. How much is Ann willing to pay for F streetlights?
A) 0
B) A
C) B
D) C

Question

Use the following to answer questions:
Figure: Market Failure 
-(Figure: Market Failure) Look at the figure Market Failure. Suppose the supply curve represents the marginal cost of providing streetlights in a neighborhood that is composed of two people, Ann and Joe. The demand curve represents the marginal benefit that Ann receives from the streetlights. Suppose that Joe's marginal benefit from the streetlights is a constant amount equal to AC. How much is Ann willing to pay for F streetlights?
A) 0 
B) A 
C) B 
D) C

Quizplus · Accepted Answer

Ann's willingness to pay for F streetlights is represented by the point on the demand curve at quantity F, which corresponds to the price level B.

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