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13) Suppose Abe is a hot shot economics major, and realizes that mosquito repellant is actually a pure public good. Intuitively he thinks that the
13) Suppose Abe is a hot shot economics major, and realizes that mosquito repellant is actually a pure public good. Intuitively he thinks that the three would be better off if they collectively purchased the repellant rather than individually buying repellant. Assuming that Abe is correct and repellant is a pure public good, what is the socially optimal number of repellant canisters for this three person collectivity? In the aggregate, is more or less repellant purchased after collective provision? How should the collective level of production be financed, assuming the group decides to use Lindahl prices. {10 points) c) Suppose that instead of Lindahl prices the three decide to split the cost of each canister purchased evenly and that they will determine the number of canisters to buy via the method of majority voting. What is the outcome? How does it compare to the efficient outcome? (10 points)
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