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Julian and Kevin are neighbours. They are considering the joint installation of a large fountain near their houses so that each can enjoy its beauty

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Julian and Kevin are neighbours. They are considering the joint installation of a large fountain near their houses so that each can enjoy its beauty and also improve the value of their property. Their marginal benets from the fountain are summarized by the following equations Julian: MB} = 78 4.5D Kevin: MBK = 86 5.5D where D measures the diameter of the fountain in metres. In addition, M Bs are constrained to be non-negative. For instance, when D = 1000, the equations described above would imply M B J = 4422 and M B K = 5414, but in this case, the \"non-negative\" constraint on MB means that we should instead interpret MBJ = 0 and MB; = 0 for this D = 1000. 60. The total marginal benet should look like the graph below. 61. 62. Total MB B C nlameter orthe Fountaln [n] We can identify the three points as: xcoordinate ycoordinate Point A: 0 [ Answer60A ] Point B: [ AnswerDB ] [ AnswerOC ] Point C: [ AnswerDD ] 0 Suppose the marginal cost of producing the fountain of diameter D is constant and equal to $13 per metre. Given this marginal cost, the social optimal diameter of the fountain should be [ Answerl ] metres. Suppose the marginal cost of producing the fountain of diameter D is equal to $(13 + D) per metre. Given this marginal cost, the social optimal diameter of the fountain should be [ Answer62 ] metres

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