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Unformatted text preview: above that MSB A is equal to the sum of the individual MBs. From the table: MSB A = (11-q a ) + (1) = 12-q a Likewise, letting MSB B be societys marginal benet (or MTWP) for plants in Bs garden, we get MSB B = (1) + (6-q b ) = 7-q b Societys welfare is maximized when MSB A = p and MSB B = p . Therefore, we get 12-q a = 1 q * a = 11 7-q b = 1 q * b = 6 As expected, each person actually plants less than the ecient amount. 4. MWTP(1) = (1000) + (1300) = 2300 > 1500, MTWP(2) = (1800 - 1000) + (X-1300) = 800 -1300 + X = X-500 < 2000 therefore if X < 2500, then Q*=1, and if X > 2500, then Q*=2. 5. See notes. 1...
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- Fall '12