Question
Let's say there are two fishermen, Tom and Henry, who fish on a certain beach. Each of these two can benefit from the additional lighthouse
Let's say there are two fishermen, Tom and Henry, who fish on a certain beach. Each of these two can benefit from the additional lighthouse being built. The marginal cost of building a lighthouse is $100. Tom's marginal benefit from the lighthouse is 90-Q, Henry's marginal benefit is 40-Q, and Q is the number of lighthouses. Q1) Explain whether you cannot expect an efficient number of lighthouses to be built on this beach Q2) What is the number of efficient lighthouses? And what is the net benefit that Tom and Henry will have when an efficient number of lighthouses are built?
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