5. Public GoodsConsider 2 individuals, Arrow and Becker, who have the following demand curvesrespectively for parks respectively, and face a marginal cost curve below. QA =4-PA; QB =4-2PB; MCq=1. Here P is the price of a park, Q is the quantity, and Arepresents Arrow and B represents Becker. The price for other goods is 1.a)First, consider the scenario that the parks are private goods, similar toprivate gardens. How many parks will Arrow and Becker choose? What is the priceof the parks in the market?b)Now suppose the parks are public goods, write down the Samuelsoncondition. What is the social efficient provision of the public good?Suppose Arrow chooses the amount of the parks to provide, but he cannotexclude Becker from enjoying the parks he provides. How many parks will hechoose? Compare your result with part b), what is the implication here?d)We still ask Arrow to determine the number of parks. Suppose thegovernment has provided 1 unit of parks for the public. That means if Arrowchooses QA unit of parks, the residents enjoy Qa+1 unit of parks. Now how manyparks will Arrow choose? How much private provision is crowded out?e)Besides crowding-out problem, list another potential problem of publicprovision. Discuss the solution for the potential problem.

Given information There are 2 consumer for parks Arrow and Becker Demand curve for Arrow QA=4-PA…

5. Public Goods Consider 2 individuals, Arrow and Becker, who have the following demand curves respectively for parks respectively, and face a marginal cost curve below. Qa =4- PA; QB =4-2PB ; MCq=1. Here P is the price of a park, Q is the quantity, and A represents Arrow and B represents Becker. The price for other goods is 1. a) First, consider the scenario that the parks are private goods, similar to private gardens. How many parks will Arrow and Becker choose? What is the price of the parks in the market? b) Now suppose the parks are public goods, write down the Samuelson condition. What is the social efficient provision of the public good? c) Suppose Arrow chooses the amount of the parks to provide, but he cannot exclude Becker from enjoying the parks he provides. How many parks will he choose? Compare your result with part b), what is the implication here?

5. Public Goods Consider 2 individuals, Arrow and Becker, who have the following demand curves respectively for parks respectively, and face a marginal cost curve below. Qa =4- PA; QB =4-2PB ; MCq=1. Here P is the price of a park, Q is the quantity, and A represents Arrow and B represents Becker. The price for other goods is 1. a) First, consider the scenario that the parks are private goods, similar to private gardens. How many parks will Arrow and Becker choose? What is the price of the parks in the market? b) Now suppose the parks are public goods, write down the Samuelson condition. What is the social efficient provision of the public good? c) Suppose Arrow chooses the amount of the parks to provide, but he cannot exclude Becker from enjoying the parks he provides. How many parks will he choose? Compare your result with part b), what is the implication here?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.8P

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