Ca) The city of Winter Park has a population of 1000. All the residents of Winter Park have same demand for public goods. The marginal welfare loss from additional resident in the city is 20+2N, where N is the number of additional residents. This welfare loss arises due to different demand for public goods by additional residents. However, the services provided by city of Winter Park has spatial externalities and the marginal welfare gain from internalizing this externality is given by 100-2N. How many more residents should be added to Winter Park?
Ca) The city of Winter Park has a population of 1000. All the residents of Winter Park have same demand for public goods. The marginal welfare loss from additional resident in the city is 20+2N, where N is the number of additional residents. This welfare loss arises due to different demand for public goods by additional residents. However, the services provided by city of Winter Park has spatial externalities and the marginal welfare gain from internalizing this externality is given by 100-2N. How many more residents should be added to Winter Park?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:(a) The city of Winter Park has a population of 1000. All the residents of Winter Park have
same demand for public goods. The marginal welfare loss from additional resident in the
city is 20+2N, where N is the number of additional residents. This welfare loss arises due to
different demand for public goods by additional residents. However, the services provided by
city of Winter Park has spatial externalities and the marginal welfare gain from internalizing
this externality is given by 100-2N. How many more residents should be added to Winter
Park?
(b) There is a lot of variation in demand for public good A. This good can be provided either at
city level or at national level. Which level of government should provide good A? Explain
why.
(c) There is a large spatial externality associated with a public good B, such that everyone in
the country benefits from This good can be provided either at city level or at national level.
Which level of government should provide good B? Explain why.
2.
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