b) Consider agent A with (inverse) demand curve for the public good PA and agent B with inverse demand PB = 90 - 5QB, where prices are measured in £ pe unit. The marginal cost of producing the public good is £10 per unit. What is the Paret efficient level of the public good? Explain. Illustrate in a graph. [Hint: Compute th marginal social benefit of the public good by adding up the demand curves vertically over the p'sl
b) Consider agent A with (inverse) demand curve for the public good PA and agent B with inverse demand PB = 90 - 5QB, where prices are measured in £ pe unit. The marginal cost of producing the public good is £10 per unit. What is the Paret efficient level of the public good? Explain. Illustrate in a graph. [Hint: Compute th marginal social benefit of the public good by adding up the demand curves vertically over the p'sl
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![b) Consider agent A with (inverse) demand curve for the public good PA = 60 - 2QA
and agent B with inverse demand PB = 90 - 5QB, where prices are measured in £ per
unit. The marginal cost of producing the public good is £10 per unit. What is the Pareto
efficient level of the public good? Explain. Illustrate in a graph. [Hint: Compute the
marginal social benefit of the public good by adding up the demand curves vertically,
over the p's]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbaf6a776-7d51-41d0-b4f7-7447d55655d5%2F16c5c64b-aad6-4a90-a092-3d43707a6632%2Fowb1q2c_processed.png&w=3840&q=75)
Transcribed Image Text:b) Consider agent A with (inverse) demand curve for the public good PA = 60 - 2QA
and agent B with inverse demand PB = 90 - 5QB, where prices are measured in £ per
unit. The marginal cost of producing the public good is £10 per unit. What is the Pareto
efficient level of the public good? Explain. Illustrate in a graph. [Hint: Compute the
marginal social benefit of the public good by adding up the demand curves vertically,
over the p's]
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