A government is trying to decide how much of a public good to provide. The willingness-to-pay curves for each of its two citizens are as given in the diagram. The marginal cost curve for the public good is given by MC = Q/2, where Q is the quantity of the good. There is also a fixed cost of 10 associated with production of the good.

a. What is the optimal quantity of the public good?
b. If both citizens must be taxed equally to provide the good, will it receive a majorityvote?

  • CreatedDecember 12, 2014
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