Figure 142 Amit and Bree Are the Only Two Homeowners

question 67

Multiple Choice

Figure 14.2 Amit and Bree are the only two homeowners on an isolated private road.Both agree that installing street lights along the road would be beneficial and want to do so.Figure 14.2 shows their willingness to pay for different quantities of street lights, the market demand for street lights and the marginal cost of installing the street lights.
-Refer to Figure 14.2.Suppose Amit and Bree know each other's preferences so that it is not possible for one to deceive the other.Which of the following statements best describes the circumstances under which the optimal quantity of street lights could be achieved?

• A)The optimal quantity will be installed only if the two parties agree to pay according to their willingness to pay as indicated by their respective demand curves.
• B)Because there are only two consumers, it is likely that private bargaining will result in the optimal quantity being installed.
• C)The optimal quantity will be installed only if the two parties split the cost of installation equally.
• D)The optimal quantity will be installed only if Bree pays for the entire installation cost.

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Definitions:

Regression Line

A straight line in a scatter plot that best fits the data points and shows the relationship between two variables in linear regression analysis.

P-value

The probability of achieving outcomes in a test that are equally or more extreme than the actual observed ones, given the null hypothesis is assumed to be correct.

Null Hypothesis

The hypothesis that there is no significant difference or effect, typically the initial assumption to be tested in statistical hypothesis testing.

Alternative Hypothesis

The alternative hypothesis is a statement used in statistical testing that proposes a relationship between variables or indicates a difference, contrasting with the null hypothesis.