Question
Provide me real answer please, don't just copy and paste wrong answer. will upvote thanks A. Three shipping companies would like to build lighthouses on
Provide me real answer please, don't just copy and paste wrong answer. will upvote thanks
A. Three shipping companies would like to build lighthouses on the rocks in the local harbor to protect their ships. Altogether there are 25 locations that might require lighthouses. The cost to build and maintain each lighthouse is $60. QdA=25-(1/2)P, QdB=25-(1/10)P and QdC=25-(1/3)P.
1. If each company ignores the other companies in deciding to build, how many lighthouses will each company erect? How much net benefit does each company think (incorrectly) they will receive by erecting these lighthouses? (HINT: This is the amount they would build if this was a private good)
2. But in this case, lighthouses are both "non-rivalrous" and non-excludable. Explain why.
3. How much net benefit will each company actually receive if the number of lighthouses erected is the total calculated (in #1)? ("Actually" because this is a public good, not a private good)
4. Now suppose all the companies know that lighthouses are public goods. If company A was the first company to open, how many lighthouses will it erect? Then company B opens. How many lighthouses will B add? When company C opens for business, how many new lighthouses will company C add? Under these conditions, how many lighthouses in total will be erected? How much net benefit will each company receive with this many lighthouses?
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