The table below shows Tim's and Al's willingnesses-to-pay (marginal benefit) for each firefighter hired by their community. For example, Tim would pay $200 for 1 firefighter, and an additional $160 for a 2nd firefighter. Number ofFirefighters Tim'sWillingness to Pay Al'sWillingness to Pay 1 $200 $120 2 160 40 3 100 20 The (marginal) cost of hiring each firefighter is $120. If Tim and Al are the only two people in the society, what is the socially efficient number of firefighters?Hint: What is the total societal willingness-to-pay (marginal benefit) for each firefighter? Question 6Answer a. 1 b. 2 c. 3 d. None of the answers are correct e. Cannot be determined from the given information
The table below shows Tim's and Al's willingnesses-to-pay (marginal benefit) for each firefighter hired by their community. For example, Tim would pay $200 for 1 firefighter, and an additional $160 for a 2nd firefighter. Number ofFirefighters Tim'sWillingness to Pay Al'sWillingness to Pay 1 $200 $120 2 160 40 3 100 20 The (marginal) cost of hiring each firefighter is $120. If Tim and Al are the only two people in the society, what is the socially efficient number of firefighters?Hint: What is the total societal willingness-to-pay (marginal benefit) for each firefighter? Question 6Answer a. 1 b. 2 c. 3 d. None of the answers are correct e. Cannot be determined from the given information
Chapter18: Asymmetric Information
Section: Chapter Questions
Problem 18.7P
Related questions
Question
The table below shows Tim's and Al's willingnesses-to-pay (marginal benefit) for each firefighter hired by their community. For example, Tim would pay $200 for 1 firefighter, and an additional $160 for a 2nd firefighter.
The (marginal) cost of hiring each firefighter is $120. If Tim and Al are the only two people in the society, what is the socially efficient number of firefighters?
Hint: What is the total societal willingness-to-pay (marginal benefit) for each firefighter?
| Number of Firefighters |
Tim's |
Al's Willingness to Pay |
| 1 | $200 | $120 |
| 2 | 160 | 40 |
| 3 | 100 | 20 |
The (marginal) cost of hiring each firefighter is $120. If Tim and Al are the only two people in the society, what is the socially efficient number of firefighters?
Hint: What is the total societal willingness-to-pay (marginal benefit) for each firefighter?
Question 6Answer
a.
1
b.
2
c.
3
d.
None of the answers are correct
e.
Cannot be determined from the given information
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