2. Consider a town with two people, Bill and Ted. Bill's demand for tennis courts is given by Q 30-5P and Ted's demand for tennis courts is given as Q = 12 - 2P. The marginal cost of providing tennis courts is constant at $3. a. Suppose the tennis courts are a private good. Derive the market demand curve (social marginal benefit curve) and find the equilibrium quantity. (30 - 5P) + (12 - 2P) = 3 42 - 7P = 3 -7P = -39 P = approximately 5.57 Insert P into Bill or Ted's equation: Bill: Q 30-5(5.57) = approximately 2.15 optimal quantity of tennis courts Ted: 12 - 2(5.57) .86 optimal quantity of tennis courts b. Suppose the tennis courts are a public good. Derive the social marginal benefit curve and find the optimal quantity of the public good. = = =
2. Consider a town with two people, Bill and Ted. Bill's demand for tennis courts is given by Q 30-5P and Ted's demand for tennis courts is given as Q = 12 - 2P. The marginal cost of providing tennis courts is constant at $3. a. Suppose the tennis courts are a private good. Derive the market demand curve (social marginal benefit curve) and find the equilibrium quantity. (30 - 5P) + (12 - 2P) = 3 42 - 7P = 3 -7P = -39 P = approximately 5.57 Insert P into Bill or Ted's equation: Bill: Q 30-5(5.57) = approximately 2.15 optimal quantity of tennis courts Ted: 12 - 2(5.57) .86 optimal quantity of tennis courts b. Suppose the tennis courts are a public good. Derive the social marginal benefit curve and find the optimal quantity of the public good. = = =
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
only typed solution
Transcribed Image Text:2. Consider a town with two people, Bill and Ted. Bill's demand for tennis courts is given by Q
30 - 5P and Ted's demand for tennis courts is given as Q = 12-2P. The marginal cost of
providing tennis courts is constant at $3. a. Suppose the tennis courts are a private good.
Derive the market demand curve (social marginal benefit curve) and find the equilibrium
quantity. (30-5P) + (12-2P) = 3 427P = 3 -7P = - 39 P = approximately 5.57 Insert
P into Bill or Ted's equation: Bill: Q
approximately 2.15 optimal quantity of
tennis courts Ted: 12-2(5.57) = .86 optimal quantity of tennis courts b. Suppose the tennis
courts are a public good. Derive the social marginal benefit curve and find the optimal quantity
of the public good.
30 - 5(5.57)
=
=
=
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 4 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education