Table 11-6
Consider the city of Widgetapolis with only four residents, John, James, Mary, and Lydia. The four residents are trying to determine how many hours to spend in cleaning up the public lake. The table below shows each resident's willingness to pay for each hour of cleaning.

-Refer to Table 11-6. Suppose the cost to clean the lake is $20 per hour. How many hours should be spent cleaning the lake to maximize total surplus for the residents in Widgetapolis?
A)4 hours
B)5 hours
C)6 hours
D)7 hours

Question

Table 11-6
Consider the city of Widgetapolis with only four residents, John, James, Mary, and Lydia. The four residents are trying to determine how many hours to spend in cleaning up the public lake. The table below shows each resident's willingness to pay for each hour of cleaning.  ​
​
-Refer to Table 11-6. Suppose the cost to clean the lake is $20 per hour. How many hours should be spent cleaning the lake to maximize total surplus for the residents in Widgetapolis?
A)4 hours 
B)5 hours 
C)6 hours 
D)7 hours

Quizplus · Accepted Answer

To maximize total surplus, the lake should be cleaned until the marginal benefit equals the marginal cost. If the cost is $20 per hour, we need to find the number of hours where the marginal benefit of cleaning is equal to or just above $20. Assuming the table shows decreasing marginal benefits, 6 hours is likely the point where the marginal benefit is closest to $20 without going below it.

Table 11-6 Consider the City of Widgetapolis with Only Four Residents, John