Consider an economy with n consumers, oneprivate good and one public good. We thinkof the private good as "all other goods," andmeasure it in terms of money. There arenindividuals in the economy with utilityfunctions Ui(xi , y) = ai In y + xi , where y is thepublic good, xi is the private good consumedby individual i = 1, . .., n, and 0 < a1 < a2 < · ..< an are parameters. Initial endowment ofprivate good of each consumer is given by wi. We donote the aggregate endowment 1ofthe private good by w = Piwi. The cost ofproducing the public good is c(y) = cy forsome c> 0. Find the optimal provision of thepublic good as well as how much is providedunder voluntary contributions.

Consider an economy with n consumers, one private good and one public good. We think of the private good as "all other goods," and measure it in terms of money. There are n individuals in the economy with utility functions Ui(xi, y) = ai ln y + xi, where y is the public good, xi is the private good consumed by individual i = 1, ..., n, and 0

Consider an economy with n consumers, one private good and one public good. We think of the private good as "all other goods," and measure it in terms of money. There are n individuals in the economy with utility functions Ui(xi, y) = ai ln y + xi, where y is the public good, xi is the private good consumed by individual i = 1, ..., n, and 0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose there are two consumers A and B, and two goods x and y. A's utility function has the following form UA = XA - (XB)1. Which of the following is true? Consumer A's consumption of good x exhibits a negative externality. Consumer A's consumption of good x exhibits a positive externality. Consumer B's consumption of good x exhibits a negative externality. Consumer B's consumption of good x exhibits a positive externality.
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