Question

Question 4

In a family, the husband likes to smoke but the wife hates it. The following table shows their benefit and damage:

 

Number of times that the husband smoke in a day	Husband’s marginal benefit	Wife’s marginal damage
1	$20	$2
2	$18	$4
3	$16	$6
4	$14	$8
5	$12	$10
6	$10	$12
7	$8	$14
8	$6	$16
9	$4	$18

 

a) Suppose the husband has the right to smoke. In order to prevent the husband smoking too much, the wife pays him if he smokes less. How many times will the husband smoke each day as a result? Explain your answer.

 

 

 

a) Suppose the wife has the right to stop the husband smoking, and the latter is paying the wife if he wants to smoke. How many times will the husband smoke each day as a result? Explain your answer.