Consider an economy with three people and two goods: private good (x) and public good (y). Suppose that marginal rate of transformation is 1. (one unit of private good is needed for the production of one unit of public good). The utility functions of the individuals are given below. U₁ = 2y¹/2 + x₁ U₂ = 4y¹/2 + X₂ U₂ = 6y¹/2 + x₂ What is the optimal level of public good?

Consider an economy with three people and two goods: private good (x) and public good (y). Suppose that marginal rate of transformation is 1. (one unit of private good is needed for the production of one unit of public good). The utility functions of the individuals are given below. U₁ = 2y¹/2 + x₁ U₂ = 4y¹/2 + X₂ U₂ = 6y¹/2 + x₂ What is the optimal level of public 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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