Suppose That There Are Only Two Fishermen,Zach and Jacob,who Fish

question 35

Essay

Suppose that there are only two fishermen,Zach and Jacob,who fish along a certain coast.They would each benefit if a lighthouse were built along the coast where they fish.The marginal cost of building each additional lighthouse is $150.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.
What is the efficient number of lighthouses?

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Definitions:

Percent of Sales Method

A financial forecasting model that estimates changes in balance sheet and income statement accounts as a direct percentage of sales.

Uncollectibles

Debts owed to a company that are considered to be unlikely to be paid and written off as a loss.

Bad Debt Expense

An expense account reflecting amounts that are not expected to be collected from debtors due to their inability to pay.

Accounts Receivable

Funds that customers are required to pay to a company for products or services already received but yet to be paid for.