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 $8 per hour and that the residents have agreed to split the cost of cleaning the lake equally. The number of cleaning hours that maximizes total surplus of Widgetapolis is 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.  ​
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-​Refer to Table 11-6. Suppose the cost to clean the lake is $8 per hour and that the residents have agreed to split the cost of cleaning the lake equally. The number of cleaning hours that maximizes total surplus of Widgetapolis is 7 hours.

Quizplus · Accepted Answer

The total surplus is maximized when the marginal benefit equals the marginal cost. If the cost is $8 per hour and the residents agree to split it equally, the optimal number of cleaning hours is determined by where the marginal benefit curve intersects the $8 cost line, which is given as 7 hours in the table.

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