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Answer to Question #74074 in Finance for Nomsa

Question #74074
Suppose that there are only two fishermen, Zach and Jacob, who fish along a certain coast. They would each benefit if lighthouses were built along the coast where they fish. The marginal cost of building each additional light house is K100.00. The marginal benefit to Zach of each additional lighthouse is 90-Q, and the marginal benefit to Jacob is 40-Q, where Q equals the number of lighthouses.

TASK
a. Explain why we might not expect to find the efficient number of lighthouses along the coast.
b. (Showing all calculations) what is the efficient number of lighthouses? What would be the net benefits to Zach and Jacob if the efficient number were provided?
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Comments

obby
18.03.18, 20:19

he efficient number of lighthouses is 15. If the efficient number were provided then the net benefits to Zach and Jacob would be K210. (any idea how this 210 was found??)

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