The Puritan Wellness Hotel sits next to the natural springs in the Silver Forest. Local firm Refectio Deorum (RD) bottles mineral water only from this source. Guests of the Puritan can bathe in the springs, and are charged for the privilege. The inverse demand function is P = 50 - Q, where Q is the number of daily bathers who purchase the pass to the springs. The Puritan incurs no costs when its guests use the springs, but RD estimates that every bather adds $20 in daily filtering expenses. What is the privately optimal number of bathing passes to sell for the Puritan, and what is the socially optimal number of passes? A. Privately optimal is 25 passes; socially optimal is 15 passes. B. Privately optimal is 40 passes; socially optimal is 75 passes. C. Privately optimal is 100 passes; socially optimal is not to bathe at all. D. The optimal number of hours, privately as well as socially, is 50.
The Puritan Wellness Hotel sits next to the natural springs in the Silver Forest. Local firm Refectio Deorum (RD) bottles mineral water only from this source. Guests of the Puritan can bathe in the springs, and are charged for the privilege. The inverse demand function is P = 50 - Q, where Q is the number of daily bathers who purchase the pass to the springs. The Puritan incurs no costs when its guests use the springs, but RD estimates that every bather adds $20 in daily filtering expenses. What is the privately optimal number of bathing passes to sell for the Puritan, and what is the socially optimal number of passes?
A. Privately optimal is 25 passes; socially optimal is 15 passes.
B. Privately optimal is 40 passes; socially optimal is 75 passes.
C. Privately optimal is 100 passes; socially optimal is not to bathe at all.
D. The optimal number of hours, privately as well as socially, is 50.
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