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Homework answers / question archive / Raineyville, Washington, is a small town in the foothills of the Cascade Mountains
Raineyville, Washington, is a small town in the foothills of the Cascade Mountains. It is quite wet in Raineyville, so the city leaders have proposed building a series of large umbrellas covering the sidewalks in the quaint downtown shopping area. There are 1000 citizens in Raineyville and they each are willing to pay $60 for each additional umbrella. The cost of purchasing and installing the umbrellas is given by c(U)=375U?, which implies that the marginal cost of providing an umbrella is MC(U) = 750U. What is the Pareto efficient number of umbrellas for Raineyville to install? Please fill your answers in the blank area below.
Pareto Efficient condition :
Sum of all marginal benefits = marginal cost
Marginal benefit = $60
Sum of all marginal benefits = 1000 x 60 = 60000
Marginal cost = 750U
60000 = 750U
U = 80
