2. Consider a society consisting with three individuals whose demand curves for a pure public good are Pa = 100-X, P = 110- X, P= 150- X for individual A, B, and C respectively. Marginal costs are constant and equal to $150 for each unit provided. (b) Suppose the government provided this output rate and taxed each person at a rate of $50/unit. Would the voters approve a referendum calling for a 5-unit reduction in X? Why or why not?

2. Consider a society consisting with three individuals whose demand curves for a pure public good are Pa = 100-X, P = 110- X, P= 150- X for individual A, B, and C respectively. Marginal costs are constant and equal to $150 for each unit provided. (b) Suppose the government provided this output rate and taxed each person at a rate of $50/unit. Would the voters approve a referendum calling for a 5-unit reduction in X? Why or why not?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. Consider a society consisting with three individuals whose demand curves for a pure public good are Pa 100-X, P= 110- X, Pe=150-X = for individual A, B, and C respectively. Marginal costs are constant and equal to $150 for each unit provided. (a) Determine the pareto optimal output rate and calculate the Lindahl prices for each individual.
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