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Suppose that Scott and Bob live on the same street. In the winter, both of them like the snow on their street to be plowed. Bob’s demand is given by Q = 40 – P, and Scott’s demand is given by Q = 30 – 2P. Suppose that the marginal cost of plowing the snow is constant at $35.
a. Using the inverse demand for each, solve for the social marginal benefit curve.
b. What is the socially efficient amount of plowing?
c. Suppose the input costs of plowing fell and marginal costs of plowing were now constant at $5
However, the university administration will charge the college $10,000 per student for the first 100 students enrolled each year for administrative costs and its share of the tuition payments.
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