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A village is made up of four residents: Bart, Steve, Cyrus, and Sheng. They value

fine restaurant dining experiences according to the following table:

1st meal out each week and 2nd meal out each week

Bart 100 and 50

Steve 50 and 25

Cyrus 200 and 25

Sheng 100 and 100

a) Plot (in one graph) the maximum willingness to pay (MWTP) for each unit, for

each resident. Connect the dots for each individual, and label the line with the

residentâ€™s name.

b) Plot (in another graph) the social MWTP for each meal out. Connect the dots and

label the line.

c) Suppose the marginal cost of a restaurant meal out is $35. Draw a third graph in

which you include the social MWTP (from (b)) and the marginal cost curve.

Indicate the socially optimal quantity of restaurant meals as a point on your graph.

d) How many meals out will be eaten in total, each week? (Integers only, please).

How are these allocated among the village residents?

e) Is this market failing, or succeeding, in terms of delivering the optimal quantity?

Explain.

fine restaurant dining experiences according to the following table:

1st meal out each week and 2nd meal out each week

Bart 100 and 50

Steve 50 and 25

Cyrus 200 and 25

Sheng 100 and 100

a) Plot (in one graph) the maximum willingness to pay (MWTP) for each unit, for

each resident. Connect the dots for each individual, and label the line with the

residentâ€™s name.

b) Plot (in another graph) the social MWTP for each meal out. Connect the dots and

label the line.

c) Suppose the marginal cost of a restaurant meal out is $35. Draw a third graph in

which you include the social MWTP (from (b)) and the marginal cost curve.

Indicate the socially optimal quantity of restaurant meals as a point on your graph.

d) How many meals out will be eaten in total, each week? (Integers only, please).

How are these allocated among the village residents?

e) Is this market failing, or succeeding, in terms of delivering the optimal quantity?

Explain.

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