- Answer This Question Breifly Include All The Necessary Information And Steps Required This Is A 5 Marks Question It Is A 1 (25.18 KiB) Viewed 40 times
INFORMATION AND STEPS REQUIRED THIS IS A 5 MARKS QUESTION IT IS A
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Problem 2 [5 points] Person A smokes, but his room mate B hates smoking. A and B have the following utility functions: U₁ = 100 + 8c — 0.1c²; Uß = 100 – 6c where c is the number of cigarettes smoked by A. Also assume that cigarettes are available at zero cost. Determine: the socially optimal level of cigarette smoked by A; b. the number of cigarettes smoked by A when he is completely free to smoke; the optimal Pigouvian tax.