Three countries are considering cooperating to fund a new tsunami warning system. The system will provide early detection of tsunamis and broadcast warnings over public airways, making the information freely available to everyone in the three countries. Each country’s demand for the system is as follows, where P is the price (or willingness to pay) in dollars, and Q is the number of hours per year that the system will broadcast:

P1=1,500-0.5Q

P2=4,500-0.7Q

P3=3,000-0.2Q

The marginal cost of operating the system is constant at $5,000 per hour.

a) What is the efficient level of operation for this system (in hours/year)?

b) Is it likely that the countries will provide sufficient funding to operate the system at this level? Explain your answer.

Answer rating: 100% (QA)

a The efficient level of operation for this system would ... View the full answer