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##### A village is made up of four residents

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Question

A village is made up of four residents: Bart, Steve, Cyrus, and Sheng. They value;fine restaurant dining experiences according to the following table;1st meal out each week and 2nd meal out each week;Bart 100 and 50;Steve 50 and 25;Cyrus 200 and 25;Sheng 100 and 100;a) Plot (in one graph) the maximum willingness to pay (MWTP) for each unit, for;each resident. Connect the dots for each individual, and label the line with the;resident?s name.;b) Plot (in another graph) the social MWTP for each meal out. Connect the dots and;label the line.;c) Suppose the marginal cost of a restaurant meal out is \$35. Draw a third graph in;which you include the social MWTP (from (b)) and the marginal cost curve.;Indicate the socially optimal quantity of restaurant meals as a point on your graph.;d) How many meals out will be eaten in total, each week? (Integers only, please).;How are these allocated among the village residents?;e) Is this market failing, or succeeding, in terms of delivering the optimal quantity?;Explain.

Paper#26889 | Written in 18-Jul-2015

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