The demand functions of individual A and B for a public good (G) is given by: PA = 500-2G & PB = 200- 0.8G where, P = price offered by each individual (RM) and G = units of public goods. Suppose the marginal cost (MC) to produce G is constant, RM250. a. Derive the aggregate demand equation for the above public good. b. Sketch all the information provided above in the diagram below. [Note: Show all the demand and marginal cost functions in detail] Harga / Price 800 600 400 200 100 200 300 Kuantiti / Quantity c. Calculate the total quantity of public goods produced assuming no free riders are present (G*). Show this result in the above diagram. d. Calculate the prices to be paid by individuals A (PA) and B (PB), respectively. e. Calculate the total quantity of public goods produced (G) assuming individual B is a free rider.

The demand functions of individual A and B for a public good (G) is given by: PA = 500-2G & PB = 200- 0.8G where, P = price offered by each individual (RM) and G = units of public goods. Suppose the marginal cost (MC) to produce G is constant, RM250. a. Derive the aggregate demand equation for the above public good. b. Sketch all the information provided above in the diagram below. [Note: Show all the demand and marginal cost functions in detail] Harga / Price 800 600 400 200 100 200 300 Kuantiti / Quantity c. Calculate the total quantity of public goods produced assuming no free riders are present (G*). Show this result in the above diagram. d. Calculate the prices to be paid by individuals A (PA) and B (PB), respectively. e. Calculate the total quantity of public goods produced (G) assuming individual B is a free rider.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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