1. Are the streetlight presented in this problem a private good or a public good? Explain why or why not.

2. If the cost of erecting a streetlight is $12, how many will Sam want to erect (if Sam ignores what Nick is doing)? How many will Nick erect (if Nick ignores what Sam is doing?) How much NPB will each receive from their action?

3. What is the optimal number of streetlights? How much TPB will each receive at the optimal quantity?

4. What is the DWL caused by each ignoring the other (your answer to #2?) Show this DWL in a diagram.

5. If the two are good neighbors, can you suggest a payment scheme which each neighbor might agree to, to increase the number of streetlights from your answer to #2 to the optimal number?

Public Goods Use the following table to work Problems 12 and 13. The table sets out the marginal benefits that Sam and Nick receive from the town's street lighting: Public Goods Use the following table to work Problems 12 and 13. The table sets out the marginal benefits that Sam and Nick receive from the town's street lighting