-Mike, Joe, and Sam Are Roommates

question 133

Multiple Choice

-Mike, Joe, and Sam are roommates. They need lamps for their common living room. Lamps in their living room are a public good for these roommates. The marginal benefit that each individual receives from varying numbers of lamps in the living room is given in the table above. If the marginal cost of a lamp is 13, what is the efficient number of lamps for the roommates to purchase?

• A) 2
• B) 5
• C) 0
• D) 1

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Definitions:

Unit Costs

The cost incurred by a business to produce, store, and sell one unit of a particular product or service.

Plant Size

The capacity or physical extent of a manufacturing facility, including its machinery, layout, and workforce.

Economies of Scale

Competitive edge gained by firms through efficient production methods, leading to a reduction in the cost for each unit produced as the scale of production grows.

Natural Gas Pipeline

A system of pipes that transports natural gas from its source to the consumers or to a processing plant.