Assume the social marginal benefit of remote-control drone flights is given by SMB = 200 - 2Q and the marginal cost is given by MC = 3Q + 50. Assuming there are no external benefits and in a perfectly competitive environment, the equilibrium price per flight would be $_____ and the equilibrium number of flights would be _____.

Question

Quizplus · Accepted Answer

To find the equilibrium price and quantity, set SMB equal to MC and solve for Q: 200 - 2Q = 3Q + 50, which simplifies to 5Q = 150, so Q = 30. Substitute Q back into either equation to find the price: SMB = 200 - 2(30) = 140.

Assume the Social Marginal Benefit of Remote-Control Drone Flights Is