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3. The government can increase its effectiveness of mosquito control by increasing the number of gallons of mosquito spray it applies.Suppose for simplicity that there are only two people in society, Adam and Beth.The demand for mosquito control by Adam is given by:

QA:200150100500

P:050100150200

Beth's demand curve is given by:

QB:200150100500

P:0100200300400

Suppose the mosquito control is a pure public good; that is, once it is produced everyone benefits from it.

  1. Graph the Adam and Beth's , and the aggregate demand for mosquito control
  2. What would be the optimal level of mosquito control if it could be produced with a constant marginal cost of $100 per unit and there are no fixed costs?
  3. If mosquito control were left to the private market, can we tell how much would be produced?Why or why not?
  4. If the government were to produce the optimal level of mosquito control, how much would it cost?
  5. The government decides to go ahead and produce the optimal level of mosquito control, and then has to determine how to cover the cost.Suppose it decides to tax each person, Adam and Beth, in proportion to the benefits received.What will be the tax paid by each person?
  6. The above question assumes that the government knows each person's demand for mosquito control.This is not very realistic.Discuss briefly the difficulties the government would face in acquiring this information if citizens knew that the tax bill was to be allocated in proportion to each person's estimated benefits received.

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