My neighbor, the Wang family, plants peach trees on their property. I benefit from the Wang family's peach trees because I pick up the peaches that fall on my side of the property line. My marginal willingness to pay for these peaches can be described as 250 - 100. Assume that the marginal cost of maintaining peach trees is 200 + 20Q and the Wang family can sell their peaches from one tree for $400. Q denotes the number of trees. a. How many peach trees would the Wang family maintain at the market equilibrium, i.e., ignoring my benefits? b. What is the socially efficient number of trees? c. The Wang family is considering putting up nets that will prevent peaches from falling on my side of the property line. Can I negotiate an outcome that would make both the Wang family and me better off? Explain.

My neighbor, the Wang family, plants peach trees on their property. I benefit from the Wang family's peach trees because I pick up the peaches that fall on my side of the property line. My marginal willingness to pay for these peaches can be described as 250 - 100. Assume that the marginal cost of maintaining peach trees is 200 + 20Q and the Wang family can sell their peaches from one tree for $400. Q denotes the number of trees. a. How many peach trees would the Wang family maintain at the market equilibrium, i.e., ignoring my benefits? b. What is the socially efficient number of trees? c. The Wang family is considering putting up nets that will prevent peaches from falling on my side of the property line. Can I negotiate an outcome that would make both the Wang family and me better off? Explain.

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Frontiers Of Microeconomics

Section: Chapter Questions

Problem 6PA

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