Question

Thelma and Louise are neighbours. During the winter, it is impossible for a snowplow to clear the street in front of Thelma's house without clearing the front of Louise's. Thelma's marginal benefit from snowplowing services is 12 - Z, where Z is the number of times the street is plowed. Louise's marginal benefit is 8 - 22. The marginal cost of getting the street plowed is $16. Sketch the two marginal benefit schedules and the aggregate marginal benefit schedule. Draw in the marginal cost schedule, and find the efficient level of provision for snowplowing services.

Answer 1

MB of mc Aggregate MB Aggreg point 20 Equitibrium 16th ...mc Louisell MB Thelma's mol | 1:33 & 6.66 12 16 20 z Thelma's mB Louise's MB gate mo T 12 2 17. -N 10 3 1 9 2 1 12-2 6 4 ? 8-22 14 ! 20-32 Aeoseste Aggregate MB = 20 -32 mc = 16 The efficient level of provision for snow plowing obtained where Aggregate me = mc. 80 20-32 = 16 32 -4 = 2=4 = 1.333 | This is also depicted in the diagram.