Anna and Bob are the only residents of a small town. The town currently funds its fire department solely from the individual contributions of these two residents. Each of the two residents has a utility function over private goods x and total number of firemen M, of the form: u(x,M)=2lnx+lnM. The total provision of firemen hired, M, is the sum of the number hired by each of the two persons: M=MA+MB. Ann and Bob both have income of 200 each, and the price of both the private good and a fireman is 1. They are limited to providing between 0 and 200 firemen. For the purposes of this problem, you can treat the number of firemen as a continuous variable (it could be man-years). How many firemen are hired if the government does not intervene? a.M=80 b.M=400/3 c.M=200/3 d.M=0
Anna and Bob are the only residents of a small town. The town currently funds its fire department solely from the individual contributions of these two residents. Each of the two residents has a utility
How many firemen are hired if the government does not intervene?
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