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Figure: Market Failure
-(Figure: Market Failure)Use Figure: Market Failure.Suppose that the supply curve represents the marginal cost of providing streetlights in a neighborhood where only two people,Ann and Joe,reside.The demand curve represents the marginal benefit that Ann receives from the streetlights.Suppose that Joe's marginal benefit from the streetlights is a constant amount equal to the vertical distance A-C.How much is Ann willing to pay for F streetlights?
A)0
B)A
C)B

Question

Use the following to answer question:
Figure: Market Failure 
-(Figure: Market Failure)Use Figure: Market Failure.Suppose that the supply curve represents the marginal cost of providing streetlights in a neighborhood where only two people,Ann and Joe,reside.The demand curve represents the marginal benefit that Ann receives from the streetlights.Suppose that Joe's marginal benefit from the streetlights is a constant amount equal to the vertical distance A-C.How much is Ann willing to pay for F streetlights?
A)0 
B)A 
C)B

Quizplus · Accepted Answer

Ann is willing to pay an amount equal to the vertical distance B for F streetlights, as indicated by the demand curve at point F.

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