Question 1 PUBLIC PROVISION OF PRIVATE GOODS There are 100 (m) individuals in society. 50 (m) individuals are basically healthy, or have low private marginal benefit from an extra visit to a hospital as PMB = 100 - 20v {$ per visit} when v is the number of visits by the individual to the hospital. 50 {m} individuals are basically unhealthy, or have high private marginal benefit from a visit to a hospital as PMB = 200 - 20v (3 per visit} Because a hospital visit is a private good, the social marginal benefit [SM B} schedule is obtained by horizontally summing the private marginal benefit {PMB} schedules. a] When a basically healthy person has a PMB of 60 {S per visit], how many visits to the hospital is he making? When a basically unhealthy person has a PMB of 60 (5 per visit}, how many visits to the hospital is he making? When the SMB is 60 {S per visit}, how many visits to the hospital are being made? b} Repeat [a] but for PMB and SMB of 20 [5 per visit}. c) Using your answers above and approximating the schedule to a straight line, draw the SMB schedule for visits to the hospital. The cost of a tvpical visit to a hospital is 40 (5 per visit]. (In order to concentrate on the issues of the question, assume that every:r hospital visit costs $40 per visit. d) What is the efficient number of visits to a hospital? e} The government decides not to charge for hospital visits. How many visits to hospitals will be made? f} Is the government policy efficient? 3} What is the welfare loss associated with the policy of free provision?