Consider the table.

Number of street lamps1234567Marginal benefit (in $)3026221814106

Suppose that a small town wants to install street lamps, which are nonrival in consumption and nonexcludable. Each of the 25 people in the town value street lamps according to the given schedule.

Street lamps each cost $250 to install. Use this information to answer the questions.

What is the socially optimal number of street lamps?

street lamps

street lamps

Suppose that 20 of the 25 townspeople decide that they will not help pay for street lamps, and will instead enjoy (for free) the street lamps built by the other five people. What is the maximum number of street lamps that will be built by the remaining five people?

street lamps

street lamps

Suppose the town government decides to build street lamps and pay for the street lamps through taxation. How much should each person be taxed to pay for the optimal number of street lamps if everyone is taxed equally?

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