Questions & AnswersMicroeconomics

Suppose that three individuals each benefit from a public good. ...

Answered step-by-step
Asked by AgentExplorationRabbit8 on

Suppose that three individuals each benefit from a public good. ...

Suppose that three individuals each benefit from a public good. 

The marginal cost of the public good provision is fixed at $15 per unit: MC = $15 

Whereas each of the three individuals (Person 1, Person 2, and Person 3) each receive a marginal benefit for each unit of the public good defined by: 

Person 1: MB1= 30 − 2Q 

Person 2: MB2= 20 − 2Q 

Person 3: MB3= 21 − Q 

As is the case with public goods, they are non-rival. Therefore, note that each person gains benefit from the total amount of Q purchased by everybody, not just the individual value that they purchase themselves (e.g. Q1, Q2, or Q3). 

1. Draw a figure with all three MB curves, the MC curve, and the Social Marginal Benefit (SMB) Curve. Label all x-intercepts, y-intercepts, and kinks in the SMB curve

2. Given the above MB curves, write down the Social Marginal Benefit Curve as a function of Q. Show your work. 

3. What is the Socially Optimal Choice of Q and would any private individual purchase this on their own? Show your work. 

Suppose that you are on the town council, and that the town currently has Q = 11 of this public 
good. You are considering raising money from Persons 1 - 3 in order to buy another unit of Q, 
where Person 1 pays t1, Person 2 pays t2, Person 3 pays t3 (t1, t2, and t3 can all be different). 
4. Propose a set of taxes (t1, t2, t3) such that they both (i) raise enough money to buy the 
extra unit of Q, and (ii) that they make each person strictly better off. Show your work. 

please show graph as well

Answer & Explanation

Solved by verified expert
Answered by Prisoner8755121 on
<p>sectetur adipiscing eli</p><p>sectetur adipiscing elit.</p><p>sectetur adipiscing</p><p> </p><p>sectetu</p><p> </p><p>sectet</p><p>sect</p><p>sect</p><p> </p>sectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a molestie consequat, ultrices a
CliffsNotes Logo

Unlock access to this and over
10,000 step-by-step explanations

Unlock Explanation

Have an account? Log In

Step-by-step explanation

<p><strong>sectetu</strong></p><figure class="image"><img src="/qa/attachment/36685908/" alt="36685908"/></figure><p><strong>sectetu</strong></p><p>sectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis.</p><p> </p><p>sectetur adipisci</p><p> </p><p>sectetur ad</p><p>sectetur adipiscing el</p><p>sectetur ad</p><p> </p><p>sectetur adipiscing</p><p>sectetur adipiscing el</p><p> </p><p>sectetur adi</p><p>sectetur a</p><p> </p><p> </p><p><strong>sectetu</strong></p><p>sectetur ad</p><p> </p><p>sectetur adipiscing elit. Nam lacinia pulvi</p><p> </p><p>sectetur a</p><p>sectetur adipiscing elit. Nam lacinia pulvinar tortor nec fa</p><p> </p><p>sectetur a</p><p>sectetur ad</p><p> </p><p>sectetur</p><p>sectetur adipiscing elit. Nam lacinia pulvinar tortor nec</p><p> </p><p>sectetur adipiscing elit. Nam lacini</p><p> </p><p><strong>sectetu</strong></p><p>sectetur adipiscing elit. Na</p><p> </p><p>sectetur ad</p><p>sectetur adipis</p><p> </p><p>sectetur adipiscing elit. Nam lac</p><p> </p><p>sectetur adip</p><p> </p><p>sectetur adi</p><p> </p><p>sectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibu</p><p>sect</p><p>sectet</p><p>sect</p>
1 attachment
Subscribe to unlock attachment

Get unstuck with a CliffsNotes subscription

Example CliffsNotes Question and Answer
Unlock every step-by-step explanation, download literature note PDFs, plus more.Get Access

Related Q&A