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Scenario: Alexander and Vanessa
Alexander and Vanessa benefit from scientific research.Alexander's marginal private benefit from such research is given by the equation MPB = 200 - Q,where Q refers to the amount of research undertaken and MPB captures the marginal private benefit Alexander gets from different marginal quantities.Meanwhile,Vanessa's marginal private benefit from such research is given by the equation MPB = 100 - Q.The marginal social cost of such research is constant at $100.
-(Scenario: Alexander and Vanessa)Use Scenario: Alexander and Vanessa.What is the socially optimal amount of scientific research for this economy?
A) 60 units
B) 300 units
C) 100 units
D) 200 units

Question

Quizplus · Accepted Answer

The socially optimal amount of scientific research is when the Marginal Social Benefit (MSB) equals the Marginal Social Cost (MSC). In this scenario, the MSC is constant at $100, and the MSB is the sum of Alexander and Vanessa's MPB, which is (200-Q) + (100-Q) = 300-2Q. To find the socially optimal amount, set MSB equal to MSC and solve for Q:
300-2Q=100
2Q=200
Q=100
Therefore, the socially optimal amount of scientific research for this economy is 100 units.

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