First consider a public good of value to Ann and Bob with the property that the value of the good can be expressed in monetary terms. In this case, the Samuelson condition states that the efficient level of the good is determined by MV +MVP where p is the per unit price of the good, and, B for example, MV is Ann's marginal value of the good. Now consider a public good of value to Ann and Bob, the value of which CANNOT be expressed in monetary terms. In this case O a. We need more information before we can know how to modify the Samuelson condition. Ob. The Samuelson condition is of no use because we cannot compare Ann's utility to Bob's. Oc. The price must be replaced with a relative price, and the marginal values must be replaced with the corresponding Marginal Rates of Substitution. Od. The Samuleson condition continues to work as in the case where values CAN be expressed in monetary terms.
First consider a public good of value to Ann and Bob with the property that the value of the good can be expressed in monetary terms. In this case, the Samuelson condition states that the efficient level of the good is determined by MV +MVP where p is the per unit price of the good, and, B for example, MV is Ann's marginal value of the good. Now consider a public good of value to Ann and Bob, the value of which CANNOT be expressed in monetary terms. In this case O a. We need more information before we can know how to modify the Samuelson condition. Ob. The Samuelson condition is of no use because we cannot compare Ann's utility to Bob's. Oc. The price must be replaced with a relative price, and the marginal values must be replaced with the corresponding Marginal Rates of Substitution. Od. The Samuleson condition continues to work as in the case where values CAN be expressed in monetary terms.
Chapter19: Externalities And Public Goods
Section: Chapter Questions
Problem 19.7P
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