Scenario: Private and External Benefits A small community finds that tidy lawns and neighborhoods provide both private and external benefits.They determine that the marginal private benefit (MPB) of lawns can be represented by the following 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 following equation: MPC = 0.5Q, where Q is again the number of hours engaged in lawn upkeep.
(Scenario: Private and External Benefits) Based on the information provided in the 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; $50
B)45 hours; $20
C)50 hours; $25
D)100 hours; $50

Question

Quizplus · Accepted Answer

To find the equilibrium quantity of lawn upkeep in this community, we need to set MPB equal to MPC:

50 - 0.5Q = 0.5Q

Solving for Q:

50 = Q

So the equilibrium level of lawn upkeep in the community is 50 hours.

To find the marginal private benefit at this level:

MPB = 50 - 0.5(50) = $25

Therefore, the best choice is C, 50 hours of lawn upkeep with a marginal private benefit of $25.

Scenario: Private and External Benefits a Small Community Finds That