Question: b) Consider agent A with (inverse) demand curve for the public good PA = 60 - 2QA and agent B with inverse demand PB =

b) Consider agent A with (inverse) demand curve for the public good PA = 60 - 2QA and agent B with inverse demand PB = 90 - 50,, where prices are measured in f per unit. The marginal cost of producing the public good is f10 per unit. What is the Pareto efficient level of the public good? Explain. Illustrate in a graph. [Hint: Compute the marginal social benefit of the public good by adding up the demand curves vertically, over the p's] (4 marks)

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