There are two people. Each person's demand for a public good is P = 20 - Q. The marginal cost of providing the public good is given by MC2 = $12 (MC is not $24). The above graph summarizes the relevant information. The total demand for the two workers shown above is the vertical sum of the demand curve for each worker. (a) What is the socially efficient quantity of the public good? (b) How much will each person have to pay per unit to provide the socially efficient quantity? (c) What is the consumer surplus for each person based on the quantity determined in (a) and the price determined in (b)? (d) Given that this is a public good, if either one of the two people does not pay the price you have stated in (b), can they be prevented from consuming the good?
There are two people. Each person's demand for a public good is P = 20 - Q.
The marginal cost of providing the public good is given by MC2 = $12 (MC is not $24). The
above graph summarizes the relevant information. The total demand for the two workers
shown above is the vertical sum of the demand curve for each worker.
(a) What is the socially efficient quantity of the public good?
(b) How much will each person have to pay per unit to provide the socially efficient
quantity?
(c) What is the
the
(d) Given that this is a public good, if either one of the two people does not pay the price you
have stated in (b), can they be prevented from consuming the good?
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