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 xx and total number of firemen MM, of the form: u(x,M)=2lnx+lnMu(x,M)=2ln⁡x+ln⁡M. The total provision of firemen hired, MM, is the sum of the number hired by each of the two persons: M=MA+MBM=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 00 and 200200 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? Anna and Bob are the only residents of a small town. The town currently funds its fire department solely from the individual contributions ofthese 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) = 2 ln x+ In M. The total provision of firemen hired, M, is the sum of the number hired by each of the two persons:M = M4 + 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 toproviding between 0 and 200 firemen. For the purposes of this problem, you can treat the number of firemen as a continuous variable (it couldbe man-years).How many firemen are hired if the government does not intervene?

In general, utility refers to the amount of joy or satisfaction (or alleviated suffering) that an…

Answered: Anna and Bob are the only residents of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 xx and total number of firemen MM, of the form: u(x,M)=2lnx+lnMu(x,M)=2ln⁡x+ln⁡M. The total provision of firemen hired, MM, is the sum of the number hired by each of the two persons: M=MA+MBM=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 00 and 200200 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?

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