1.2.4 Bonnie and Clyde share a street on their way to their homes and wish to illuminate it. Bonnie’s demand for street lamps is given by P = $4, while Clyde’s demand for streetlamps is given by P = $6. Street lamp production involves marginal costs given by MC = 5Q, where Q = number of street lamps.

a. What is the optimal level of street lamps installed?

b. How much should Bonnie and Clyde each be charged?

c. Graph (a)-

(b) in a diagram.

d. How would your answers to the above change if MC = $3?

If MC = $12?

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Price ($) 0 25 Bert's Demand DB 50 Q=50-2 PA