Suppose that two roommates are buying plants for their apartment. Chuck (denoted with "C") and Judy (denoted with "J") would each gain the marginal benefits as a function of the quantity of plants purchased (Q) given by:
MBᴄ = 20 - Q
MBᴊ = 30 - 20
However, each individual plant costs money, with the marginal cost of each unit given by:
MC = 4 +0.25Q
Given these marginal benefit curves and the marginal cost curve:
1. What is the maximum quantity that would be purchased in the private market?
2. What is the socially optimal quantity to purchase?
3. What is the Total Surplus generated in the private market equilibrium?
4. What is the Total Surplus generated in the socially optimal equilibrium?
