What is the efficient number of light-houses

Reference no: EM131499810

Question: Suppose that there are only two fishermen, Zach and Jacob, who fish along a certain coast. They would each benefit if lighthouses were built along the coast where they fish. The marginal cost of building each additional light-house is $100. 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.

a. Explain why we might not expect to find the efficient number of lighthouses along this coast.

b. What is the efficient number of light-houses? What would be the net benefits to Zach and Jacob if the efficient number were provided?

Reference no: EM131499810

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