Multiple Choice
Use the following to answer questions:
Scenario: Private and External Benefits
A small community finds that tidy lawns and neighborhoods provide both private and external benefits. They determine that the marginal private benefit (MPB) of lawns can be represented by the equation MPB = 50 - 0.5Q, where Q is the number of hours spent on keeping lawns tidy. The marginal private cost (MPC) of such lawn upkeep is represented by the equation MPC = 0.5Q, where Q is again the number of hours engaged in lawn upkeep.
-(Scenario: Private and External Benefits) Look at the scenario Private and External Benefits. The community decides that given all the benefits of lawn upkeep, it is important to maintain the socially optimal number of lawn upkeep hours. To achieve this, the community will:
A) require community lawn service of 45 hours.
B) subsidize everyone who contributes to lawn upkeep with a payment of $15.
C) implement a Pigouvian lawn tax of $65.
D) provide no additional funds to lawn upkeep.
Correct Answer:
Verified
Correct Answer:
Verified
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