Question

Consider a society with two individuals, A and B, who must decide how many trees to plant. Trees are beneficial because they transform the greenhouse gas carbon dioxide into oxygen; this benefit is both non-rival and non- excludable. Suppose that A and B both privately decide to plant zero trees. Is it possible that the socially optimal number of trees is also zero? Explain.

Answer 1

Answer : Yes, it is possible that "the socially optimal number of trees is zero". Because here the society has only two individuals : individual A and individual B. If both individuals decide that they will plant zero trees then the marginal social benefit = marginal social cost = 0 (zero) for trees. The socially optimal number occur when the marginal social benefit = marginal social cost. As here marginal social benefit = marginal social cost = 0 when both individuals A and B plants zero trees, hence here the socially optimal number is zero.