Now suppose instead of consuming pizza ann and bob are, Ask an Expert

Economics

Now suppose instead of consuming pizza, Ann and Bob are choosing how much clean air to consume. Again suppose Ann’s marginal benefit (valued in dollars) is

MBA(Q) = 8 − Q,

while Bob’s is also MBB(Q) = 8 − Q.

a) What will be the aggregate demand for clean air?

b) Suppose the constant marginal cost of clean air is $6, if Ann and Bob individually choose how much clean air to have, how much clean air will be consumed?

c) What is the socially optimal amount of clean air? Show the individual and aggregate demand curves for air, as well as the socially optimal amount of clean air on a graph.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91529997

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