Question
Bill and Ted are neighbors in a rural area. They are considering the joint installation of a large satellite TV dish so that they can
Bill and Ted are neighbors in a rural area. They are considering the joint installation of a large satellite TV dish so that they can have consistent entertainment. Bill's marginal benefit from the dish is MBB=500-4Qwhere Q measures the total number of channels they purchase per year. Ted's marginal benefit from the dish isMBT=400-3Q. Assume that the marginal cost of channels is constant at $80 per channel per year.
a.Find an equation to represent the total marginal benefit of the dish.
b.What is the socially optimal number of channels?
c.Would you expect Bill and Ted to choose the socially optimal number of channels? Explain why or why not. (hint: look at each individual's private interest vs public interest.)
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Discrete and Combinatorial Mathematics An Applied Introduction
Authors: Ralph P. Grimaldi
5th edition
201726343, 978-0201726343
