Just north of the town of Muskrat, Ontario, is the town of Brass Monkey, population 6,400.Brass Monkey, like Muskrat, has a single public good, the town skating rink, and a single private good, Labatt Ale.Everyone's utility function is Ui (Xi, Y) = Xi - 81/Y, where Xi is the number of bottles of ale consumed by i and Y is the size of the skating rink in square meters.The price of ale is $1 per bottle.The cost of the skating rink to the city is $4 per square meter.Everyone has an income of at least $5,000.What is the Pareto efficient size for the town skating rink?
A) 360 square meters
B) 480 square meters
C) 240 square meters
D) 725 square meters
E) None of the above.
Correct Answer:
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