Question

The marginal cost of providing 25 neighborhood street lamps is $2000. There are 3 people living in the neighborhood. Person 1 is willing to pay $800 for the 25 lamps and person 2 is willing to pay $300 for the 25 street lamps. Efficiency requires that 25 lamps be provided. What is the minimum amount person 3 is willing to pay for 25 street lamps?

Answer 1

Person 3 needs to pay $900.

Explanation:

Consider the provided information.

The marginal cost of providing 25 neighborhood street lamps is $2000.

Person 1 is willing to pay $800 for the 25 lamps.

person 2 is willing to pay $300 for the 25 street lamps.

We need to find the minimum amount person 3 is willing to pay for 25 street lamps?

Let person 3 need to pay x amount.

Therefore, the sum of the amount should be equal to $2000.

$2000=$800+$300+x

$2000=$1100+x

x=$2000-$1100

x=$900

Hence, person 3 needs to pay $900.