1. Two families (A and B) live on a street without garbage collection. The local council will provide garbage collection services if the families are willing to pay for the running costs, which are $35 per month per collection. The demand for the two families for garbage collection is estimated to be = 20 0.5 and = 15 0.5, where P is the price the family is willing to pay for garbage collection per month. Determine the a. socially efficient level of garbage collection 4 Marks b. share of tax burden for both families under Lindahl pricing. 6 Marks

2. A society (made up of only two individuals (x1 and x2) faces the social welfare function, = 61 + 312 and constraint of, 10 = 1 + 2. a. Determine the allocation between 1 and 2 to maximize social welfare using both Lagrangian and Substitution method.