Consider the table. Number of street lamps Marginal benefit (in $) 1 2 3 4 5 6 7 30 26 22 18 14 10 6 Suppose that a small town wants to install street lamps, which are nonrival in consumption and nonexcludable. Each of the 25 people in the town value street lamps according to the given schedule. Street lamps each cost $250 to install. Use this information to answer the questions. What is the socially optimal number of street lamps? Suppose that 20 of the 25 townspeople decide that they will not help pay for street lamps, and will instead enjoy (for free) the street lamps built by the other five people. What is the maximum number of street lamps that will be built by the remaining five people? Suppose the town government decides to build street lamps and pay for the street lamps through taxation. How much should each person be taxed to pay for the optimal number of street lamps if everyone is taxed equally? I street lamps street lamps

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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Consider the table.
Number of street lamps
Marginal benefit (in $)
123
4 5 6 7
30 26 22 18 14 10 6
Suppose that a small town wants to install street lamps, which are nonrival in consumption and nonexcludable. Each of the 25
people in the town value street lamps according to the given schedule.
Street lamps each cost $250 to install. Use this information to answer the questions.
What is the socially optimal number of street lamps?
Suppose that 20 of the 25 townspeople decide that they will
not help pay for street lamps, and will instead enjoy (for free)
the street lamps built by the other five people. What is the
maximum number of street lamps that will be built by the
remaining five people?
Suppose the town government decides to build street lamps
and pay for the street lamps through taxation. How much
should each person be taxed to pay for the optimal number of
street lamps if everyone is taxed equally?
S
I
street lamps
street lamps
Transcribed Image Text:Consider the table. Number of street lamps Marginal benefit (in $) 123 4 5 6 7 30 26 22 18 14 10 6 Suppose that a small town wants to install street lamps, which are nonrival in consumption and nonexcludable. Each of the 25 people in the town value street lamps according to the given schedule. Street lamps each cost $250 to install. Use this information to answer the questions. What is the socially optimal number of street lamps? Suppose that 20 of the 25 townspeople decide that they will not help pay for street lamps, and will instead enjoy (for free) the street lamps built by the other five people. What is the maximum number of street lamps that will be built by the remaining five people? Suppose the town government decides to build street lamps and pay for the street lamps through taxation. How much should each person be taxed to pay for the optimal number of street lamps if everyone is taxed equally? S I street lamps street lamps
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