Suppose there are only two individuals in society. The demand curve for tsetse fly control

control for person A is given by:

qa= 100 - P

The corresponding demand curve for person B is:

qb = 150 - P

where P is the price that i is willing to pay for tsetse fly control.

i. Suppose tsetse fly control is a pure public good, what would be the optimal level of

this activity if it could be produced at a constant marginal cost of 100$ per unit?

ii. If tsetse fly control were left to the private market, will an optimal amount be

produced? Explain your answer.

iii. If the government were to produce the optimal amount of tsetse fly control, how

much will this cost? How should the tax bill for this amount be allocated between

the individuals if they are to share it in proportion to benefits received from tsetse fly

control?