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Suppose that the final good is also composed of public goods. That is, it is difficult to exclude individuals from consuming a share of .
Suppose that the final good is also composed of public goods. That is, it is difficult to exclude individuals from consuming a share of . Specifically, for each final good produced, the representative firm only receives a share of revenue, where 0 < < 1. Use the social planner diagram to show if the competitive equilibrium allocation is Pareto optimum. (You may use the linear production function = ) Hint: The firm's profit in this economy is =
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