In a country there are 4 types of individuals The utility function of the ith type is given by: U, (x,,G) = x₁ + i*InG; i = 1,2,3,4 where, x, denotes the private good consumed by each citizen and G denotes the public good. The first type has 2 individuals, the second type has 3 individuals, the third and the fourth type have 2 individuals each. The marginal cost of providing the public good is 9/-. a. Compute the efficient level of provision of the public good. b. Assume that the local government asks the voters to directly decide about level of G

In a country there are 4 types of individuals The utility function of the ith type is given by: U, (x,,G) = x₁ + i*InG; i = 1,2,3,4 where, x, denotes the private good consumed by each citizen and G denotes the public good. The first type has 2 individuals, the second type has 3 individuals, the third and the fourth type have 2 individuals each. The marginal cost of providing the public good is 9/-. a. Compute the efficient level of provision of the public good. b. Assume that the local government asks the voters to directly decide about level of G

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.7P

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