Figure 11-2 Amit and Bree are the only two homeowners on an isolated private road. Both agree that installing street lights along the road would be beneficial and want to do so. Figure 11-2 shows their willingness to pay for different quantities of street lights, the market demand for street lights and the marginal cost of installing the street lights.
-Refer to Figure 11-2.How much is Amit willing to pay to have 4 street lights installed?

Question

Figure 11-2  Amit and Bree are the only two homeowners on an isolated private road. Both agree that installing street lights along the road would be beneficial and want to do so. Figure 11-2 shows their willingness to pay for different quantities of street lights, the market demand for street lights and the marginal cost of installing the street lights.
-Refer to Figure 11-2.How much is Amit willing to pay to have 4 street lights installed?

Quizplus · Accepted Answer

Amit's willingness to pay for 4 street lights is $900, which is the highest among the quantities shown in the graph. Therefore, the best choice is to install 4 street lights to maximize the total surplus (consumer surplus plus producer surplus) for both Amit and Bree.

Figure 11-2 Amit and Bree Are the Only Two