Use the following to answer questions :
Scenario: Private and External Benefits
A small community finds that tidy lawns and neighbourhoods 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)Use Scenario: Private and External Benefits.How many hours of lawn upkeep will occur in this community,and what will be the marginal private benefit of such upkeep?
A) 50 hours and $50
B) 45 hours and $20
C) 50 hours and $25
D) 100 hours and $50

Question

Quizplus · Accepted Answer

To determine the number of hours of lawn upkeep in the community, we must find the point where the marginal private benefit (MPB) equals the marginal private cost (MPC).

MPB = MPC
50 - 0.5Q = 0.5Q
50 = Q

Therefore, the number of hours of lawn upkeep in the community is 50.

To find the marginal private benefit of such upkeep, we plug Q = 50 into the MPB equation.

MPB = 50 - 0.5(50) = $25

Thus, the answer is choice C, 50 hours of lawn upkeep and a marginal private benefit of $25.

Use the Following to Answer Questions