Consider a product market with three consumers A, B and C with demand function PA = 6 – QA, PB = 6 – 2QB and PC = 12 – QC respectively, where P is the price in dollars and QA, QB and QC are the quantities demanded by Consumer A, B and C respectively. The marginal cost of the product is constant at $4. (i) If the product is public good, analyse the product and determine the optimal quantity of the product in the market. (ii) How will your answer be different if the product is a private good instead?
Consider a product market with three consumers A, B and C with demand function PA = 6 – QA, PB = 6 – 2QB and PC = 12 – QC respectively, where P is the price in dollars and QA, QB and QC are the quantities demanded by Consumer A, B and C respectively. The marginal cost of the product is constant at $4. (i) If the product is public good, analyse the product and determine the optimal quantity of the product in the market. (ii) How will your answer be different if the product is a private good instead?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Consider a product market with three consumers A, B and C with demand function PA = 6 – QA, PB = 6 – 2QB and PC = 12 – QC respectively, where P is the price in dollars and QA, QB and QC are the quantities demanded by Consumer A, B and C respectively. The marginal cost of the product is constant at $4.
(i) If the product is public good, analyse the product and determine the optimal quantity of the product in the market.
(ii) How will your answer be different if the product is a private good instead?
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