2. There are three groups of consumers of a public good. The demands for the groups are as follows: Group 1: $P_1 = 60 - Q$; Group 2: $P_2 = 100 - Q$; Group 3: $P_3 = 140 - Q$ where Q is the number of units of the good provided and P is the price in dollars. The marginal cost of providing the good is $180. What is the economically efficient level of provision of the public good? Illustrate.
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Question 1. [Public Goods, 20 points] There are three consumers of a public good. The demands for consumers are as follows: p1 = 50 - G p2 = 110 - G p3 = 150 - G, where G measures the number of units of the good and pi is the price in dollars. The marginal cost of the public good is $190. 1. What is the optimal level of provision of the public good according to the Samuelson condition? Illustrate your answer with a graph. 2. What are the Lindahl prices that implement the optimal level of the public good you calculated above? 3. Explain why the public good may not be supplied at all under voluntary contribution because of the free-rider problem.
Akash M.
Consider three consumers indexed by i ∈ {1,2,3} with the following demand functions for a public good G: P1 = 20 - (1/10)G, P2 = 20 - (1/10)G, P3 = 20 - (2/10)G If marginal cost is 20, what is the equilibrium level of public good provided by the market? (Hint: You need to horizontally sum the demand curves here.)
Oluwadamilola A.
The following table shows how the marginal benefit of a service varies for five consumers. Quantity 1 2 3 Serkan 150 125 100 Asuman 125 100 75 Bahar 100 75 50 Murat 200 150 125 Meric 600 400 200 Derive the demand curve for this service assuming that it is a public good. If the marginal cost of the good is 850, what is the efficient output of the public good? If the marginal cost of the good is 425, what is the efficient output of the public good? If the marginal cost of the good is 850, what is the efficient output assuming it is a private good?
Prashant B.
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