Military Defense is a public good. The cost (supply) of each "unit" of military defense is P=3. Kim's valuation for each unit of defense (demand) is given by PK=10–Q, and Derek's valuation is given by PD=5–0.5Q.How many units of military defense would be provided by the free market?

Military Defense is a public good. The cost (supply) of each "unit" of military defense is P=3. Kim's valuation for each unit of defense (demand) is given by PK=10–Q, and Derek's valuation is given by PD=5–0.5Q.How many units of military defense would be provided by the free market?

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter4: Markets In Action

Section: Chapter Questions

Problem 19SQ

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Military Defense is a public good. The cost (supply) of each "unit" of military defense is P=3. Kim's valuation for each unit of defense (demand) is given by PK=10–Q, and Derek's valuation is given by PD=5–0.5Q. The resulting social demand function is PS=15-1.5Q.What is the socially optimal allocation of military defense?
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