Two consumers, M and N, have the following demand curves M: PM = 24 – 2Q N: PN = 48 – 4Q Where PM and PN represent marginal willingness-to-pay values for M and N respectively. Q represents the quantity of output. (a) If M and N are the only consumers in the market and the product is a public good, obtain the market social benefit equation. Draw the two individual private benefits and the marginal social benefit curves in the same diagram. (b) If M and N are the only consumers in the market and the product is a private good, obtain the market demand equation
Two consumers, M and N, have the following demand curves M: PM = 24 – 2Q N: PN = 48 – 4Q Where PM and PN represent marginal willingness-to-pay values for M and N respectively. Q represents the quantity of output. (a) If M and N are the only consumers in the market and the product is a public good, obtain the market social benefit equation. Draw the two individual private benefits and the marginal social benefit curves in the same diagram. (b) If M and N are the only consumers in the market and the product is a private good, obtain the market demand equation
Chapter16: Public Goods And Public Choice
Section: Chapter Questions
Problem 1.1P: (Optimal Provision of Public Goods) Using at least two individual consumers, show how the market...
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Two consumers, M and N, have the following demand
Where PM and PN represent marginal willingness-to-pay values for M and N respectively. Q represents the quantity of output.
(a) If M and N are the only consumers in the market and the product is a public good, obtain the market social benefit equation. Draw the two individual private benefits and the marginal social benefit curves in the same diagram.
(b) If M and N are the only consumers in the market and the product is a private good, obtain the market demand equation
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