Question: 1. Suppose MWTP functions for Ben and Jane are given by MWTPB= 12 - 2QBand MWTPJ= 12 - QJfor a public good that they share.

1. Suppose MWTP functions for Ben and Jane are given by MWTPB= 12 - 2QBand MWTPJ= 12 - QJfora public goodthat they share. There are no other users/consumers for this good currently. MC = 4 + Qis the marginal cost function for this goodand there are no external costs.

(a) What is the socially desirable level of production for this good?

(b) What "price" paid to the producer will guarantee the socially desirable level of production of this good?

(c)What are the amount of net social benefits received when the public good is produced at the socially desirable level of production?

(d) What price should Ben pay to guarantee the socially desirable level of production of this good? Is he likely to pay that price? Explain.

[Show calculations to justify your answers.In order to answer this question well, you have to go over the section on public good carefully.]

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