Question
Suppose that, one summer, a construction company begins a large project next door to a restaurant that has a large patio that is always full
Suppose that, one summer, a construction company begins a large project next door to a restaurant that has a large patio that is always full of outdoor diners. The company works at the project site 24-hours per day. This work is noisy and creates a lot of dust. The restaurant finds that its customers cannot safely or enjoyably dine outside whenever construction work is going on, and it must therefore close its patio during any hours when construction work is underway. The restaurant loses $200 of revenue during every hour that its patio is closed. The construction company, meanwhile, could work for fewer hours per day at costs described by = 25, where represents the hours of construction shut-down each day. Local laws grant construction companies the right to work up to 24 hours per day at their project sites. a. Represent this scenario graphically. b. In your graph for part a, shade in the area that represents the total cost to society of the construction companys current choice to operate the job site around the clock. c. Calculate the socially efficient number of hours that construction should shut down for the restaurant to open its patio each day. d. Suppose that the restaurant approaches the construction company and offers to pay the companys cost of shutting down its work on the project site while the restaurant opens its patio for dining. What amount of social net benefits would result from this negotiation? In your graph for part a, shade in the area that represents these net benefits.
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