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Three young professionals, Anita, Buzz, and Cemal, contemplate hiring a cleaner for their shared house. The individual demands for cleaning are given by PA=60 Q,
Three young professionals, Anita, Buzz, and Cemal, contemplate hiring a cleaner for their shared house. The individual demands for cleaning are given by PA=60 Q, PB=100 Q, and Pc=140 Q, where Q is the number of times per year the house is cleaned and P is the price in 5. The cleaner charges the fee of F for cleaning the entire house. (a) What is the efficient number of times per year the house should be cleaned if F=$180? What if F: $120? Explain your answer and illustrate it on a diagram. [15 points] (b) Suppose each resident decides individually how much to contribute towards cleaning costs. How many times a year will the house be cleaned and what will the individual contributions be if F: $180? What if F: $120? Explain your answer and illustrate it on a diagram. [20 points] (c) Calculate the deadweight loss associated with the market failure in this situation for F=$180 and F=$120. Show the deadweight loss for these two cases on two separate diagrams. [15 points]
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