There are 100 residents in the City of Mos Eisley. Each resident's willingness to pay for an additional acre of parkland (P)depends on the number of acres the City already has (Q), and is given by P = 20 - 0.10Q. If parkland is a public good, and the cost of each acre of parkland is constant and equal to $500, then what's the socially optimal number of acres of parkland in Mos Eisley?

Question

Quizplus · Accepted Answer

If each resident's willingness to pay for an additional acre of parkland is given by P = 20 - 0.10Q, and there are 100 residents, then the total willingness to pay for parkland is P = 2000 - 10Q. Setting this equal to the marginal cost of each acre, we have that 500 = 2,000 - 10Q, implying that Q = 150 acres.

There Are 100 Residents in the City of Mos Eisley