Consider an economy with a private good and public good. The economyconsists of two consumers whose utility functions are:u1(x1, y) = 1/2 ln x1 +1/2 ln y and u2(x2, y) = 1/3 ln x2 +2/3 ln y.The endowment of consumer 1 is w1 = 2, and endowment of consumer 2 is w2 = 3, both in units of private goods. The production of public good uses the linear technology y = z.1. Find Lindahl equilibrium.

A Lindahl equilibrium is a concept in economics and public finance theory that addresses the problem…

Answered: Consider an economy with a private good…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider an economy with a private good and public good. The economy
consists of two consumers whose utility functions are:
u₁(x₁, y) = 1/2 ln x₁ +1/2 ln y and u₂(x₂, y) = 1/3 ln x₂ +2/3 ln y.
The endowment of consumer 1 is w₁ = 2, and endowment of consumer 2 is w₂ = 3, both in units of private goods. The production of public good uses the linear technology y = z.

1. Find Lindahl equilibrium.

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