Question

Suppose that 10 people live on a street and that each of them is willing to pay GHS 2 for each extra streetlight, regardless of the number of streetlights provided. If the cost of providing x streetlights is given by 2 )( x xC  , what is the Pareto efficient number of streetlights to provide?

Answer 1

If the cost of providing x streetlights is given by C(x) = x^2, then the Pareto efficient number of streetlights to provide is:

$10\times2\times x = x^2,$

x = 20 streetlights.