The table below provides Fred and Janes marginal benefit MB

The table below provides Fred and Jane\'s marginal benefit (MB) in the market for parks. Use this information in the following two (2) questions. Fred\'s MB 10 Jane\'s MB 10 0 4

Solution

Answer : 36) Option number a is the right answer.

Because from the given table, it is clear that at quantity level 1 both Fred and Jane gets same marginal benefit,       MB = 10 . This means here the marginal social benefit (MSB) is 10 in park market. The allocative efficiency occur at that point where MSB = MSC. Given that MSC = $10. Now it is clear that at quantity level 1, MSB = MSC. Therefore, quantity level 1 is the allocative efficiency level.