Question
Four families share a common stretch of beach and they are considering a program of improvement, including astairway and a play structure for children. The
Four families share a common stretch of beach and they are considering a program of improvement, including astairway and a play structure for children. The demand curve (i.e. the marginal willingness to pay curve) of each family for the improvement is:
Family 1) (Q) = 20-Q
Family 2) (Q) = 20 - Q
Family 3) (Q) = 28 - Q
Family 4) (Q) = 16 - 2Q
A) Derive the aggregate Marginal willingness to pay curve.
B) Suppose that four families agree to share the cost of the improvement equally. What would be the maximum beach improvement they could realize?
C) what is the efficient level of beach improvement? Propose a cost sharing arrangement among the four families that ensures the efficient outcome to be implemented.
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