Suppose 10 People Live on a Street and That Each

question 77

Essay

Suppose 10 people live on a street and that each of them is willing to pay $2 for streetlight, regardless of the number of streetlights provided. If the cost of providing x streetlights is given by c(x)= x², what is the Pareto efficient number of streetlights to provide?

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Definitions:

Derived Demand

The demand for resources (inputs) that is dependent on the demand for the outputs those resources can be used to produce.

Inputs Demand

The desire or requirement for factors of production, like labor and capital, that businesses need to produce goods or services.

Demand for Outputs

The quantity of goods and services that consumers and businesses are willing and able to purchase at various prices during a certain period of time.

Marginal Revenue Product

The additional revenue generated from employing one more unit of a factor of production.