Purchase Solution

Marginal cost and snowplowing

Not what you're looking for?

Ask Custom Question

Public Goods
Thelma and Louise are neighbors. During the winter, it is impossible for a snowplow to clear the street in front of Thelmaâ??s house without clearing the front of Louiseâ??s. Thelmaâ??s marginal benefit from snowplowing services is 12-Z, where Z is the number of times the street is plowed. Louiseâ??s marginal benefit is 8-2Z. The marginal cost of getting the street plowed is $16.

Sketch the two marginal benefit schedules and the aggregate marginal benefit schedule. Draw in the marginal cost schedule, and find the efficient level of provision for snowplowing services. If Thelma and Louise can come to an agreement that allows for the efficient level of provision of the snowplowing services, what are three possible ways in which they can share the costs? If Thelma and Louise cannot come to an agreement, how many times will the street be plowed?

Purchase this Solution
Solution Summary

Efficient level of snowplowing determined by marginal costs and benefits

Solution Preview

To find the amount that a group would pay for a public good, we sum their demand curves vertically. This is done because the good must be consumed in equal amounts, unlike a private good. Vertical summation of 12 -Z and 8-2Z gives us the MSB curve shown on the attached file. At $16, the MSC, we find that this curve is ...

Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

View More Free Quizzes
Related BrainMass Solutions

  • Role of Cost in Decision Making in Healthcare Industry

    369735 Role of Cost in Decision Making in Healthcare Industry Please answer all questions thoroughly and no plagarism. Please review all answers. Course material: Neumann, B. R., Clement, J. P., and Cooper, J. C.

  • Marginal Cost Curve in Firm's Supply Curve

    Note that the marginal cost may change with volume, and so at each level of production, the marginal cost is the cost of the next unit produced.

  • The marginal cost curve

    (ii) Comment on the following statement: "Average cost includes both fixed and variable costs, whereas marginal cost only includes variable costs.

  • Marginal & Average Cost Curve

    The marginal cost and average variable cost remains the same because that per-firm costs is a fixed cost.

  • Externalities: A summary

    The marginal private benefit curve intersects the marginal private cost curve to the left of the intersection of the marginal social benefit curve and marginal social cost curves.

  • Marginal costs

    Thus we can use marginal cost and marginal revenue to calculate the output level that maximizes profit. So long as marginal revenue exceeds marginal cost, increasing output.

  • Marginal Cost

    You have seen that the marginal cost curve cuts the average cost curve from below at the pint where the average cost is the least and then becomes higher and higher than the average cost.

  • Profits of a price taking firm

    Comparing total cost and total revenue is one way to find the profit-maximizing rate of output. A second and more revealing way is to use marginal revenue and marginal cost.

  • Analyze Cost and Role in Decision Making

    The expert analyzes cost and role in decision making. The expert differentiates between opportunity, marginal, and relevant cost; marginal benefit versus marginal costs

View More Related Solutions