Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Can anyone show me how to do 1-4 step by step with a graph. Thank you! Problem 1: Public Goods [10 Points] Suppose that three

image text in transcribed

Can anyone show me how to do 1-4 step by step with a graph. Thank you!

image text in transcribed
Problem 1: Public Goods [10 Points] Suppose that three individuals each benefit from a public good. The marginal cost of the public good provision is fixed at $15 per unit: MC = $15 Whereas each of the three individuals {Person 1, Person 2, and Person 3) each receive a marginal benefit for each unit of the public good defined by: Person 1: M31 = 30 2Q Person 2: MB2 = 20 2Q Person 3: M83 = 21 Q As is the case with public goods, they are non-rival. Therefore, note that each person gains benefit from the total amount of (1 purchased by everybody, not just the individual value that they purchase themselves (eg. Q1, Q2, or 0.3). 1. Draw a figure with all three MB curves, the MC curve, and the Social Marginal Benefit (5MB) Curve. Label all x-intercepts, y-intercepts, and kinks in the SMB curve. [2 points] 2. Given the above MB curves, write down the Social Marginal Benefit Curve as a function of Q. Show your work. [2 points] 3. What is the Socially Optimal Choice of Q and would any private individual purchase this on their own? Show your work. [2 points] Suppose that you are on the town council, and that the town currently has Q = 11 of this public good. You are considering raising money from Persons 1 - 3 in order to buy another unit of Q, where Person 1 pays t1, Person 2 pays t2, Person 3 pays t3 (t1, t2, and t; can all be different). 4. Propose a set of taxes in, t2, t3) such that they both (i) raise enough money to buy the extra unit of Q, and (ii) that they make each person strictly better off. Show your work. [4 points]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Strategic Management And Business Policy: Globalization, Innovation And Sustainability

Authors: Thomas L. Wheelen, J. David Hunger, Alan N. Hoffman, Chuck Bamford

14th Edition

0133126145, 978-0133126143

More Books

Students also viewed these Economics questions

Question

Who owns an accountants working papers?

Answered: 1 week ago

Question

1. Too reflect on self-management

Answered: 1 week ago

Question

Food supply

Answered: 1 week ago