Bob and Nancy live in a new housing development and they would like to have fire hydrants installed. The table Marginal Benefit of Fire Hydrants shows Bob's and Nancy's individual marginal benefits of different quantities of fire hydrants. Suppose that the marginal cost of installing a hydrant is $10. Table: Marginal Benefit of Fire Hydrants Number of Bob's Nancy's Individual Fire Hydrants in the Neighborhood Individual Marginal Benefit Marginal Benefit 0 $16 14 12 8 8 4 4 5 0 The optimal number of fire hydrants in the neighborhood is L 2 3
