Bonnie and Clyde take the same route on their way to their home. They want to improve the security on one particular street by installing more street lamps.

Data from figure 1

Bonnie’s demand for street lamps is given by P = $4, while Clyde’s is given by P = $6. The marginal cost of producing street lamps is MC = 5Q, where Q = number of street lamps.

a. What is the optimal level of street lamps installed?

b. How much would you charge Bonnie and Clyde?

c. Using a graph, illustrate your answers to parts a. and b.

d. How would your answers to the above change if MC = $3?
If MC = $12?

Transcribed Image Text:

Price ($) 25 0 Bonnie's Demand DB 50 B Q = 50-2 PA