Consider two consumers with the following demand functions for a public good. P1 = 10 - 0.1G P2 = 20 - 0.1G where P1 is the price that person 1 is willing to pay for quantity G and  P2 is the price that person 2 is willing to pay for quantity G  What is the optimal level of the public good if the marginal cost of the public good is Ksh. 25. What is the total cost  of producing the optimal quantity how much does each person contribute towards the cost

Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter19: Externalities And Public Goods
Section: Chapter Questions
Problem 19.6P
icon
Related questions
Question

Consider two consumers with the following demand functions for a public good.

P1 = 10 - 0.1G

P2 = 20 - 0.1G

where P1 is the price that person 1 is willing to pay for quantity G and  P2 is the price that person 2 is willing to pay for quantity G 

  1. What is the optimal level of the public good if the marginal cost of the public good is Ksh. 25.
  2. What is the total cost  of producing the optimal quantity
  3. how much does each person contribute towards the cost
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Production Possibility Frontier
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Microeconomic Theory
Microeconomic Theory
Economics
ISBN:
9781337517942
Author:
NICHOLSON
Publisher:
Cengage
Economics: Private and Public Choice (MindTap Cou…
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Macroeconomics: Private and Public Choice (MindTa…
Macroeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506756
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Microeconomics: Private and Public Choice (MindTa…
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Exploring Economics
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
ECON MICRO
ECON MICRO
Economics
ISBN:
9781337000536
Author:
William A. McEachern
Publisher:
Cengage Learning