Ben and John like cookies C and roads R. Their respective utility functions are defined as follows:
Ub = ln(Cb )+ln(Rb +Rj)
Uj = ln(Cj)+ln(Rb +Rj) Both enjoy a $20 income. The price of cookie is 1 while the price of road is 2.
a When they take their decisions separately, how much roads do Ben and John decide to consume?
b What is the socially-optimal level of road consumption?
c Explain the differences observed between the two previous questions.