need clearly explained for each question uestions 7 to 11 Alpha, Beta and Gamma
ID: 2429314 • Letter: N
Question
need clearly explained for each question
uestions 7 to 11 Alpha, Beta and Gamma are the only citizens of a small town. The three citizens must decide on the number of flower beds for the town Each citizen's marginal benefit (MB) from a flower bed (x) is . Alpha: MB 1000-4x Beta: MB 2000-8x Gamma: MB 3000-12x If the marginal cost of a flower bed is $1200, the optimal social number of flower beds is a. 100 b. 200 ?. 300 d. 350 8 Alpha's marginal benefit at the optimal number of flower beds is a. $100 b. 200 ?. 300 d. 1000 Gamma's marginal benefit at the optimal number of flower beds is a. $0 b. 400 ?. 600 d. 800 10. If each resident was asked to pay one-third of the cost of the flower beds, Beta would a. agree with the project and pay her/his share of the cost. b. disagree with the project and pay nothing C. be u d. be indifferent between having the flower beds or not. nsure whet ther he/she would pay his/her share or not. 11. If Alpha was asked to pay 50% of the cost of flower beds, she/he would a. agree with the project and pay her/his share of the cost. b. disagree with the project and pay nothing c. be unsure whether he/she would pay his/her share or not. d. be indifferent between having the flower beds or not.Explanation / Answer
7) b is correct
Total marginal benefit = 1000-4x + 2000-8x + 3000-12x
= 6000 - 24x
At social optimal level, total marginal benefit = marginal cost
6000 - 24x = 1200
x= 200
8) b is correct
Alpha's MB = 1000-4(200)= 200
9) c is correct
Gamma's MB= 3000 - 12(200) = 600
10) d is correct
One third of the cost is 1200/3= 400
Beta's MB = 2000-8(200)= 400
Here Beta's MB is equal to the cost so he will indifferent.
11) b is correct
50% of 1200= 600 which is greater than her MB of 200, so he would disagree.
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