The cost of the provision of the pure public good X is 3$ (and constant) per unit.
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Question:
The cost of the provision of the pure public good X is 3$ (and constant) per unit. Following the marginal benefits for the 5 residents of a community at each quantity of X
Quantity of X
Voter | 1 | 2 | 3 | 4 |
A | 4 | 3 | 2 | 1 |
B | 3 | 2 | 1 | 0 |
C | 2 | 1 | 0 | 0 |
D | 1 | 0 | 0 | 0 |
E | 0 | 0 | 0 | 0 |
Note: each cell represents each voter’s marginal benefit given the quantity of X.
find:
a. the equilibrium under the Lindahl allocation.
b. the equilibrium under the simple majority rule (each voter pays 0.60$ for the provision per unit).
c. Does the majority rule provide the “optimal” outcome? Explain.
d. Assume now that X is a pure private good with exactly the same MSC = 3$ as before. Describe the equilibrium quantity. Explain who will buy X, if any.
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