Question: The table below shows each person's willingness to pay for each acre of a public park. For example, Sophia is WTP $10 for the first
The table below shows each person's willingness to pay for each acre of a public park. For example, Sophia is WTP $10 for the first acre and $8 for the second acre etc.
Acres Sophia Amber Cedric 1 10 24 6 2 8 18 5 3 6 15 4 4 3 8 3 5 1 6 2 6 0 4 1 7 0 2 0
The marginal cost of each acre created/provided is $18.
a. Why would the private market have a hard time providing the optimal amount of acres? Does the private market over or under produce public goods? Explain using one of the characteristics of public goods (non-excludable or non-rival).
b. How many acres should be created (the optimal amount which maximizes total surplus)? Explain how you derived your answer and how it relates to one of the characteristics of public goods (non-excludable or non-rival).
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