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 $32 per hour and that the residents have agreed to split the cost of cleaning the lake equally. It would maximize Mary's surplus if 3 hours of cleaning is done.

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 $32 per hour and that the residents have agreed to split the cost of cleaning the lake equally. It would maximize Mary's surplus if 3 hours of cleaning is done.​

Quizplus · Accepted Answer

Maximizing Mary's surplus requires finding the point where her marginal willingness to pay for an additional hour of cleaning equals the cost of an additional hour of cleaning, and then choosing the highest number of hours up to that point where it is optimal for all residents to participate. In this case, Mary's marginal willingness to pay for an additional hour of cleaning is $12, which is less than the cost of $32 per hour, so it is not optimal for any resident to clean for more than 2 hours. Therefore, the optimal number of hours to clean the lake is 2, not 3.

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