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Suppose that there are only two fishermen, Zach and Jacob, who fish along a certain coast. They...

Suppose that there are only two fishermen, Zach and Jacob, who fish along a certain coast. They would each benefit if lighthouses were built along the coast where they fish. The mar-ginal cost of building each additional lighthouse is $100. The marginal benefit to Zach of each additional lighthouse is 90 – Q, and the marginal benefit to Jacob is 40-Q, where Q equals the number of lighthouses. a) Explain why we might not expect to find the efficient number of lighthouses along the coast. b) What is the efficient number of lighthouses? What would be the net benefits to Zach and Jacob if the efficient number were provided?

 

Apr 28 2020 View more View Less

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