Assume a first firework is lit. What is the benefit to your family? What is the total benefit to all families? Assume a second firework is lit. What is the benefit to your family from this second firework? To all families? What is the Marginal Social Benefit function (that is, the function giving the marginal benefit for society as a function of quantity)? To check yourself, make sure that if you plug 1 or 2 into your function, you should get the values you found in the last 2 questions.
Three families live around Lake Robert. Each family i has a marginal benefit from seeing q fireworks of MB(qi) = 12 − 2qi to see fireworks, which are non-rival and non-excludable. So, qi is the number of fireworks seen by a family i. Each firework set off costs $6 per unit, which represents the marginal
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Assume a first firework is lit. What is the benefit to your family? What is the total benefit to all families?
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Assume a second firework is lit. What is the benefit to your family from this second firework? To all families?
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What is the Marginal Social Benefit function (that is, the function giving the marginal benefit for society as a function of quantity)? To check yourself, make sure that if you plug 1 or 2 into your function, you should get the values you found in the last 2 questions.
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What is the efficient (total surplus maximizing) quantity of fireworks? Is the efficient quantity different from what ended up happening in (e) (the privately provided equilibrium)?
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