There are two individuals, and each is endowed with 12 units of the private good. Let U₁ = 6x +y₁, and U₂ = 6x + y₂. If g(x) = 2x² then the Samuelson condition is satisfied by x = 12. But 12 units of the public good require 72 units of the private good as input. The economy has only 24 units of the private good. What has gone wrong with our reasoning?

There are two individuals, and each is endowed with 12 units of the private good. Let U₁ = 6x +y₁, and U₂ = 6x + y₂. If g(x) = 2x² then the Samuelson condition is satisfied by x = 12. But 12 units of the public good require 72 units of the private good as input. The economy has only 24 units of the private good. What has gone wrong with our reasoning?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: Public Goods And Common Resources

Section: Chapter Questions

Problem 2PA

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