Law and Economics , law homework help

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Good exterior home maintenance leads to higher
property values throughout a neighborhood. 
Of course, the gains in property values must be balanced against the
opportunity cost of time for those who do the maintenance.  The information below applies to a particular
residential neighborhood. The first two columns show a list of home maintenance
tasks and how much each task would raise the total value of property in the
neighborhood. (The gain in total value is spread evenly over the seven houses
in the neighborhood, and everyone in the neighborhood knows and agrees upon the
gain created by each task). The second two columns list the residents of the
neighborhood, and the opportunity cost of a day of time for each resident. Each
resident has 1 day available for maintenance work, and each task takes one day.

Tasks      Total Increase in Property values    Resident   Opportunity  Cost

Plant flowers in median    $  500  Pete  $400

Install streetlights   $1,000  Angela  $1,000

Paint shutters   $800  Kirk $2,000

Replace rusty siding   $600  Ruth   $100

Repair sidewalk  $900  Sam   $450

Plant trees  $300  Beverly  $300

Plant lilacs   $200  Gertrude   $250

Repair curbs   $400

Construct and plot on a single graph the marginal
benefit and marginal cost schedules for home repair tasks. (Hint: the
horizontal axis of this graph is the 
number tasks undertaken in the neighborhood, and the vertical axis is
the marginal cost/benefit to the neighborhood of each task).

What is the optimal amount of time to devote to home
maintenance in this neighborhood?

Who should devote time to home maintenance?

What tasks should be done?

Suppose that people are assigned tasks as follows:
Pete plants flowers in the median, Angela installed the streetlights, Kirk
paints the shutters, Ruth replaces siding, Sam repairs the sidewalk, Beverly plants trees, and
Gertrude repairs the curbs. Each gets paid the resulting increase in property
values.  Does this scheme works to bring
about efficient resource allocation?  Explain.

If there were no neighborhood organization to
coordinate maintenance activities, could we expect people in the neighborhood
to undertake these maintenance tasks on their own? If so, which ones? If not,
why not?

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