3. A society consists of 3 identical individuals who derive utility from a public good. The...
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3. A society consists of 3 identical individuals who derive utility from a public good. The public good can be provided at a constant marginal cost of ¹2. Let x denote the level of public good provision by i, where i 1,2,3. Let X - x₁ + x2 + x3 be the total provision. The net benefit enjoyed by individual i from providing x, units of the public good is given by U(x₁, X) = 4 ln X - 2x; where i 1,2. Is the total provision X* under individual optimisation higher or lower than the socially optimal level of provision Xº? Explain the intuition for your result. 3. A society consists of 3 identical individuals who derive utility from a public good. The public good can be provided at a constant marginal cost of ¹2. Let x denote the level of public good provision by i, where i 1,2,3. Let X - x₁ + x2 + x3 be the total provision. The net benefit enjoyed by individual i from providing x, units of the public good is given by U(x₁, X) = 4 ln X - 2x; where i 1,2. Is the total provision X* under individual optimisation higher or lower than the socially optimal level of provision Xº? Explain the intuition for your result.
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Related Book For
Statistics for Managers Using Microsoft Excel
ISBN: 978-0133130805
7th edition
Authors: David M. Levine, David F. Stephan, Kathryn A. Szabat
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