Question
The M B curve for a public good for each of 4 identical individuals is M B = 10 0.1G, where G is units of
The M B curve for a public good for each of 4 identical individuals is M B = 10 0.1G, where G is units of the public good and M B is measured in dollars. The government must provide all G, but there are no fixed costs of doing so. The marginal cost of G is always $40, and each individual pays the same fixed amount to finance the public good provided.
a. Find and draw the aggregate M B curve for the economy along with M C. Calculate the optimal level of G, the total (gross) benefit to each individual, the aggregate (gross) benefit, the total cost of G, the tax per person, and the net benefit to each individual (and society). b. Now suppose there are 5 individuals. Repeat part (a) and compare your results. c. Now suppose there are 100 individuals. Repeat part (a) and compare your results.
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