Question
(12 points) Public fountains are considered a public good (nonrival and nonexcludable). Suppose a town has 1000 habitants, which with an identical marginal benefit
(12 points) Public fountains are considered a public good (nonrival and nonexcludable). Suppose a town has 1000 habitants, which with an identical marginal benefit curve (MB)= 12 - 0.01g, with q in cubic meters. The Marginal Cost of fountains is given by MC = 6000 + 2q. a. Find the volume of fountains provided by the market (qM), assuming there is no cooperation between habitants. b. What is Efficient provision of fountains in the town, q*? c. What is the deadweight loss at the market equilibrium? d. Explain in plain English why this good is "under provided" by the market (assuming no cooperation).
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