A) Assume that two individuals each has the marginal valuation MV=4-q of a pure public good. Show in a figure how the marginal valuation curves should be summed up when the government decides on the optimal level of public good provision. Why are the curves summed in this way? Derive and show in the figure the optimal level of provision if the marginal cost of building the public good is 4 per unit of production.

B) The demand for a pure public good is given by p=100-2q. How much will be consumed? Explain the problem in this situation.

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A For public good Market demand Curve is Vertical Summation ofindividual demand u... View the full answer