In El Carburetor, California, population 1,001, there is not much to do except to driveyour car around town. Everybody in town is just like everybody else. While everybodylikes to drive, everybody complains about the congestion, noise, and pollution causedby traffic.Suppose Lawrence, a typical citizen, has the utility function:U(m, d, h) =m+7d¯d² – 4h-where d is the number of hours per day that he spends driving around, h is the averagenumber of hours per day spent driving around by other people in his home town, andm is the amount of money he has left to spend on other stuff besides gasoline andauto repairs.Gas and auto repairs cost $1 per hour of driving.If each citizen believes that their own driving will not affect the amount of drivingdone by others, they will all drive D1 hours per day. If all citizens drive to maximizethe utility of a typical citizen, they will all drive D2 hours per day, whereD1-6 and D2=0D1-3 and D2=0D1-3 and D2=3D1-3 and D2=1D1-5 and D2=2

The objective of the question is to determine the number of hours per day each citizen will drive…

Answered: In El Carburetor, California,…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Frontiers Of Microeconomics

Section: Chapter Questions

Problem 6PA

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