4. There are three consumers of a public good. The demands for consumers are as [50-G...

 

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4. There are three consumers of a public good. The demands for consumers are as [50-G if G50 110-G if G110 follows: P 0 if G> 50 P = 0 if G > 110* 150-G if G150 P3 , where G measures the number of units of the good and p 0 if G > 150' the price in dollars. The marginal cost of the public good is $190. (a) What is the optimal level of the public good? Illustrate your answer with a graph. (Hint: Use the Samuelson condition.) (b) Explain why the public good may not be supplied at all. (Hint: Recall the free-rider problem.) (c) If the public good is not supplied at all, what is the size of the efficiency loss arising from this market failure? 4. There are three consumers of a public good. The demands for consumers are as [50-G if G50 110-G if G110 follows: P 0 if G> 50 P = 0 if G > 110* 150-G if G150 P3 , where G measures the number of units of the good and p 0 if G > 150' the price in dollars. The marginal cost of the public good is $190. (a) What is the optimal level of the public good? Illustrate your answer with a graph. (Hint: Use the Samuelson condition.) (b) Explain why the public good may not be supplied at all. (Hint: Recall the free-rider problem.) (c) If the public good is not supplied at all, what is the size of the efficiency loss arising from this market failure?