Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider an economy in which there are 50 people, who consume a private good (bread) and a public good (circuses). There are, however, two types

Consider an economy in which there are 50 people, who consume a private good (bread) and a public good (circuses). There are, however, two types of people (type 1 and type 2). Each type 1 person's marginal rate of substitution is

MRS1=20-2z

where z is the number of circuses. Each type 2 person's marginal rate of substitution is

MRS2=30-2z

There are 20 type 1 people and 30 type 2 people. The economy's marginal rate of transformation is

MRT=340+4z

Find the optimal number of circuses.

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

Essentials of Business Driven Information Systems

Authors: Paige Baltzan, Amy Phillips

1st edition

1260004716, 978-0073376721

More Books

Students also viewed these Economics questions

Question

How is a standardized residual different from a residual?

Answered: 1 week ago

Question

How easy the information is to remember

Answered: 1 week ago

Question

The personal characteristics of the sender

Answered: 1 week ago