6) Keizen and Tyke live in a small community in Cabarete in the Dominican Republic. For simplicity, assume Keizen and Tyke are the only individuals in the community. Each has a demand for mosquito control, given by the below equations. Mosquito control is provided at a constant marginal cost of $120. Keizen's demand: QDK= 200-p Tyke's demand: QDT= 180-2 p a) Draw out the demand curves Keizen and Tyke. If mosquito control is a private good, what is the market demand curve? Draw out the market demand curve assuming mosquito control is a private good. What is the equilibrium price and quantity of mosquito control? b) The Council of their community declares that mosquito control is a public good. Explain why that might be the case. How would total demand for this public good now look different? Draw out total demand assuming mosquito control is a public good. c) Calculate the inverse demand curves for Keizen and Tyke. Why do these describe their demand for the public good? d) The Council decides that since mosquito control is a public good, it will provide the service If they know Keizen and Tyke's demand curves, how much mosquito control will the government provide? How does this compare to the private outcome? Why are they different?
6) Keizen and Tyke live in a small community in Cabarete in the Dominican Republic. For simplicity, assume Keizen and Tyke are the only individuals in the community. Each has a demand for mosquito control, given by the below equations. Mosquito control is provided at a constant marginal cost of $120. Keizen's demand: QDK= 200-p Tyke's demand: QDT= 180-2 p a) Draw out the demand curves Keizen and Tyke. If mosquito control is a private good, what is the market demand curve? Draw out the market demand curve assuming mosquito control is a private good. What is the equilibrium price and quantity of mosquito control? b) The Council of their community declares that mosquito control is a public good. Explain why that might be the case. How would total demand for this public good now look different? Draw out total demand assuming mosquito control is a public good. c) Calculate the inverse demand curves for Keizen and Tyke. Why do these describe their demand for the public good? d) The Council decides that since mosquito control is a public good, it will provide the service If they know Keizen and Tyke's demand curves, how much mosquito control will the government provide? How does this compare to the private outcome? Why are they different?
Chapter27: Markets And Government
Section: Chapter Questions
Problem 4E
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Transcribed Image Text:6) Keizen and Tyke live in a small community in Cabarete in the Dominican Republic. For simplicity,
assume Keizen and Tyke are the only individuals in the community. Each has a demand for mosquito
control, given by the below equations. Mosquito control is provided at a constant marginal cost of $120.
Keizen's demand: QDK= 200-p
Tyke's demand: QDT= 180-2 p
a) Draw out the demand curves Keizen and Tyke. If mosquito control is a private good, what is the
market demand curve? Draw out the market demand curve assuming mosquito control is a private
good. What is the equilibrium price and quantity of mosquito control?
b) The Council of their community declares that mosquito control is a public good. Explain why that
might be the case. How would total demand for this public good now look different? Draw out
total demand assuming mosquito control is a public good.
c) Calculate the inverse demand curves for Keizen and Tyke. Why do these describe their demand for
the public good?
d) The Council decides that since mosquito control is a public good, it will provide the service If they
know Keizen and Tyke's demand curves, how much mosquito control will the government
provide? How does this compare to the private outcome? Why are they different?
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Step 1: Define private and public goods
VIEWStep 2: Draw the individual and market demand curves when mosquito control is private good
VIEWStep 3: Treat mosquito control as public good and draw the total demand curve
VIEWStep 4: Calculate inverse demand curves
VIEWStep 5: Compare quantity of the public good when provided by the Government vs Private
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