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What is the socially optimal level of fireworks

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Reference no: EM131179889

Consider a town that is planning a firework festival during the Fourth of July night. It cost $360 to provide 10 minutes of fireworks. The marginal private benefits (MPB) for the three residents are shown in the table below.

MPB MPB MPB MPB

Person for the for the for the for the first 10 min next 10 min next 10 min next 10 min

500 280 190 100 Person A

150 110 90   70 Person B

100   90 80   50 Person C

  1. What is the total benefit to all residents by providing 20 minutes of firework?

  2. What is the socially optimal level of fireworks?

  3. If the cost of providing firework is divided to the three residents equally, what would be the firework level decided by the majority voting rules?

Reference no: EM131179889

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