There are three consumers of a public good. The demands for consumers are as follows: p1 = 50 − G, p2 = 110 − G, p3 = 150 − G, where G measures the number of units of the good and ?? the price in dollars. The marginal cost of the public good is $190. Explain why the public good may not be supplied at all because of the free-rider problem. If the public good is not supplied at all, what is the size of the deadweight loss arising from this market failure?
There are three consumers of a public good. The demands for consumers are as follows: p1 = 50 − G, p2 = 110 − G, p3 = 150 − G, where G measures the number of units of the good and ?? the price in dollars. The marginal cost of the public good is $190. Explain why the public good may not be supplied at all because of the free-rider problem. If the public good is not supplied at all, what is the size of the deadweight loss arising from this market failure?
Chapter4: Markets In Action
Section: Chapter Questions
Problem 19SQ
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There are three consumers of a public good. The demands for consumers are as follows:
p1 = 50 − G,
p2 = 110 − G,
p3 = 150 − G,
where G measures the number of units of the good and ?? the price in dollars. The marginal cost of the public good is $190.
- Explain why the public good may not be supplied at all because of the free-rider problem.
- If the public good is not supplied at all, what is the size of the
deadweight loss arising from this market failure?
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