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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A Consider agent A with (inverse) demand curve for the public good P₁ = 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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