What is the socially-optimal level of road consumption

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Reference no: EM131236657

Ben and John like cookies C and roads R. Their respective utility functions are defined as follows:

Ub = ln(Cb )+ln(Rb +Rj)

Uj = ln(Cj)+ln(Rb +Rj) Both enjoy a $20 income. The price of cookie is 1 while the price of road is 2.

a When they take their decisions separately, how much roads do Ben and John decide to consume?

b What is the socially-optimal level of road consumption?

c Explain the differences observed between the two previous questions.

Reference no: EM131236657

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