Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 11, Problem 3SPPA
To determine
To calculate:
The marginal social benefit.
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Suppose there are two residents in a neighborhood, and you know both of their demand curves for a public good. What would you have to do in order to figure out what the social demand curve?
A.Multiply the two demand curves together
B.Add their demand curves together
C.Subtract the demand of the person with the lower valuation of the public good from the demand of the person with the higher valuation of the public good
D.Subtract the demand of the person with the higher valuation of the public good from the demand of the person with the lower valuation of the public good
Explain the efficiency condition for Public Goods. Also draw the graph and interpret the graph.
(a) Alpha, Beta and Gamma are consumers of a public good. The marginal benefit ($) of each unit of the public good is given by the following table.
Public Good
Alpha
Beta
Gamma
1st unit
8
10
12
2nd unit
4
8
3
3rd unit
2
5
0
4th unit
1
5
0
Suppose each unit of the public good costs $15. How many units of the public good would be optimal? Explain.
(b) If the public good becomes a private good and the price drops to $8. The marginal benefits are the same as that given in (a). How many units of the private good would be purchased? Explain.
Chapter 11 Solutions
Foundations of Economics (8th Edition)
Ch. 11 - Prob. 1SPPACh. 11 - Prob. 2SPPACh. 11 - Prob. 3SPPACh. 11 - Prob. 4SPPACh. 11 - Prob. 5SPPACh. 11 - Prob. 6SPPACh. 11 - Prob. 7SPPACh. 11 - Prob. 8SPPACh. 11 - Prob. 9SPPACh. 11 - Prob. 10SPPA
Ch. 11 - Prob. 1IAPACh. 11 - Prob. 2IAPACh. 11 - Prob. 3IAPACh. 11 - Prob. 4IAPACh. 11 - Prob. 5IAPACh. 11 - Prob. 6IAPACh. 11 - Prob. 7IAPACh. 11 - Prob. 8IAPACh. 11 - Prob. 9IAPACh. 11 - Prob. 1MCQCh. 11 - Prob. 2MCQCh. 11 - Prob. 3MCQCh. 11 - Prob. 4MCQCh. 11 - A renewable common resource is used sustainably if...Ch. 11 - Prob. 6MCQCh. 11 - Prob. 7MCQCh. 11 - When ITQs are assigned, the market price of an ITQ...
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