Consider a product market with two consumers X and Y with demand functions Px = 80 - Qx and Py = 160-2Qy respectively, where P is the price in dollars and Q, and Qy are the quantities demanded by Consumer X and Y. The marginal cost of the product is constant at $90. If the product is public good, obtain the marginal social benefit function. Draw the 2 individual demand functions and the marginal social benefit function in one diagram and determine the optimal quantity of the product in the market.

Consider a product market with two consumers X and Y with demand functions Px = 80 - Qx and Py = 160-2Qy respectively, where P is the price in dollars and Q, and Qy are the quantities demanded by Consumer X and Y. The marginal cost of the product is constant at $90. If the product is public good, obtain the marginal social benefit function. Draw the 2 individual demand functions and the marginal social benefit function in one diagram and determine the optimal quantity of the product in the market.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.6P

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