The government proposes an alternative, market-based solution. They charge each citizen the price p for every firemen stationed at the local fire station. Then, the price is being set at a level p* at which each individual demands the socially optimal number of firemen. What is the price p* ? Assuming that the cost of each fireman is equal to 1, would the government be able to finance the firemen using only the payments from the two citizens? a. The price is p* = 1/2, which is enough to finance the socially optimal number of firemen. b. The price must be p* = 0, which is not enough to finance the socially optimal number of firemen. c. The price is p* = 1, which is enough to finance the socially optimal number of firemen. Od. The price is p* = 1/2, which is not enough to finance the socially optimal number of firemen.
The government proposes an alternative, market-based solution. They charge each citizen the price p for every firemen stationed at the local fire station. Then, the price is being set at a level p* at which each individual demands the socially optimal number of firemen. What is the price p* ? Assuming that the cost of each fireman is equal to 1, would the government be able to finance the firemen using only the payments from the two citizens? a. The price is p* = 1/2, which is enough to finance the socially optimal number of firemen. b. The price must be p* = 0, which is not enough to finance the socially optimal number of firemen. c. The price is p* = 1, which is enough to finance the socially optimal number of firemen. Od. The price is p* = 1/2, which is not enough to finance the socially optimal number of firemen.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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