3. Dave raises puppies in his home in suburban Minneapolis and sells them for $450 each. He has no fixed costs; his marginal costs of production are given below.

No. of Puppies Marginal Cost to Dave Social Marginal Cost

1 $100 275

2 $200 375

3 $300 475

4 $400 575

5 $500 675

6 $600 775

7 $700 875

The problem is that Dave's neighbors don't want to live around so many puppies. In fact, they suffer $175 worth of damage from each dog Dave raises.

C. From the point of view of society (which, in this case, will include Dave, the people who buy his puppies, and his neighbors), what is the proper number of puppies to raise and sell? Explain in words and show on your graph. (4 points)