Use the figure below to answer the following questions.

Figure 17.3.2
-Figure 17.3.2 shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. If property rights to the pasture are granted to a farmer so that the farmer owns the pasture, the farmer raises
A)0 goats.
B)35 goats.
C)50 goats.
D)55 goats.
E)40 goats.

Question

Use the figure below to answer the following questions.
  
Figure 17.3.2
-Figure 17.3.2 shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. If property rights to the pasture are granted to a farmer so that the farmer owns the pasture, the farmer raises
A)0 goats. 
B)35 goats. 
C)50 goats. 
D)55 goats. 
E)40 goats.

Quizplus · Accepted Answer

When the farmer owns the pasture, the marginal private cost curve becomes the supply curve. The profit-maximizing level of production for the farmer would occur where marginal private cost equals marginal revenue, which in this case is at 40 goats. This is the level at which the farmer earns maximum profits. At this level, the marginal private cost curve intersects the marginal social benefit curve, showing that the private benefits of goat-raising are equal to the social benefits. Thus, the farmer should raise 40 goats.

Use the Figure Below to Answer the Following Questions