Just North of the Town of Muskrat, Ontario,is the Town

question 9

Multiple Choice

Just north of the town of Muskrat, Ontario,is the town of Brass Monkey, population 12,800.Brass Monkey, like Muskrat, has a single public good, the town skating rink and a single private good, Labatt Ale.Everyone's utility function is U_i(X_i, Y) = X_i - 121/Y, where X_i is the number of bottles of ale consumed by i and Y is the size of the skating rink in square meters.The price of ale is $1 per bottle.The cost of the skating rink to the city is $8 per square meter.Everyone has an income of at least $5,000.What is the Pareto efficient size for the town skating rink?

• A)560 square meters.
• B)885 square meters.
• C)280 square meters.
• D)440 square meters.
• E)None of the above.

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