(Scenario: Private and External Benefits)Use Scenario: Private and External Benefits

question 145

Multiple Choice

(Scenario: Private and External Benefits) Use Scenario: Private and External Benefits.The community estimates the marginal benefit to external parties from lawn upkeep to be $15.Given this information,what is the socially optimal amount of lawn upkeep for this community? Scenario: Private and External Benefits
A small community finds that tidy lawns and neighborhoods provide both private and external benefits.They determine that the marginal private benefit (MPB) of lawns can be represented by the equation MPB = 50 - 0.5Q,where Q is the number of hours spent on keeping lawns tidy.The marginal private cost (MPC) of such lawn upkeep is represented by the equation MPC = 0.5Q,where Q is again the number of hours engaged in lawn upkeep.

• A)0 hours
• B)45 hours
• C)50 hours
• D)65 hours

---

Definitions:

Variable Costing

An accounting method that includes only variable production costs (material, labor, and overhead) in product costs, with fixed overhead expenses treated as period costs.

Common Fixed Expenses

Fixed costs that are not tied to any specific product or segment and are incurred by the business as a whole.

Net Operating Income

The profit realized from a business's operations after subtracting operating expenses from operating revenues.

Break-even

The point at which total revenues equal total costs, resulting in no net profit or loss for the business.