Question: [ 1 0 ] Lucia s utility function is 3 ! + $ and Montiel s utility function is ! # , where
Lucias utility function is $ and Montiels utility function is
# where G is their expenditures
on the nonexcludable and nonrival goods that they share in their RV and where and $ are their
respective private consumption expenditures.
The total amount they have to spend on private goods and public goods is $ and they agree on a
Pareto optimal pattern of expenditures in which the amount that is spent on Lucias private
consumption is $
a How much do they spend on public goods?
b Can you think of a reason that two people in Lucia and Montiels situation would fail to
consume in a Pareto optimal manner? If so why?
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