Question: Two individuals i = {1, 2} have preferences over a private good, X, and a public good, G. Denote individual is purchase of the private

Two individuals i = {1, 2} have preferences over a private good, X, and a public good, G. Denote individual is purchase of the private good Xi and his purchase of the public good as Gi . The individuals preferences over the public and private good are:

Ui = 5 ln(Xi) + ln(G1 + G2)

While he benefits only from his own purchase of the private good, he benefits from is purchases of the public good as well as his own. The price of the private good and the public good is 1 and both individuals have an income of 60.

a. What will be the free-market provision of the public good? How much is paid for by individuals 1 and 2?

b. What is the socially optimal amount of the public good?

c. Suppose the government decides to provide 8 units of the public good. It taxes each individual 4 to pay for it. What is the total amount of the public good provided after the government intervention?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

Criminal Code Section 18-760, Robbery. A person who knowingly takes anything of value from the person or presence of another by use of force, threats, or intimidation commits robbery. Criminal Code...

Two individuals i = {1, 2} have preferences over a private good, X, and a public good, G. Denote individual is purchase of the private good Xi and his purchase of the public good as Gi. The...

Two individuals, A and B, with preferences over a private good, xi, and a public good, G, represented by the utility function, U(xi, G) = 5x, + G, decide whether to spend their endowment of4 units on...

Explain the following 1. [Externalities and car accidents] Consider an economy with two individuals i = [1, 2) with the following quasi-linear utility function uj(s', q') = v'(s') + ow where s'...

Suppose that low-productivity workers all have marginal products of 10 and highproductivity workers have marginal products of 16. The community has equal numbers of each type of worker. The local...

Two individuals i {1, 2} get utility from the consumption of a private good x; and a public good G. The utility functions are given by u(x, G) = ln(x;) + ln (G). The two individuals have an income...

3. Suppose there are two individuals, 1' = 1, 2. Each person has wealth in (w '3} 21) and consumes both a public and a private good. The public good is provided by contributions from each individual....

3. Suppose there are two individuals, 2' = 1, 2. Each person has wealth w (w > ) and consumes both a public and a private good. The public good is provided by contributions from each individual. If...

n help help Consider a 2-person economy in the form of Bergstrom, Blume, and Varian with one private good x and one public good G. Each consumer is endowed with a quantity wi of the private good, of...

An economy consists of two individuals, A and B and two goods, a private good, which is called good 1, and a public good, which is called good 2. Each individual i = A, B is endowed with 24 units of...

B 2 Public Goods ( p o s i t i v e externalities ) , 2 0 points A n economy consists o f two individuals, A and B and two goods, a private good, which i s called good 1 , and a public good, which i s...

The riddle is an attempt to explain under what conditions an MNE would have a higher or lower debt ratio and beta than its domestic counterpart. Explain and diagram these conditions.

The APB requires comprehensive interperiod income tax allocation under the deferred method. The FASB requires comprehensive interperiod income tax allocation under the asset liability approach. For...

Suppose a value stream has two products with materials costs of $20,000 and $60,000, respectively, for a given week. The conversion costs for the week are $120,000. The units produced for the first...

Hypothesis Testing of a Single Mean LCTCS Tuition: Louisiana Community And Technical College System consist of 2 community colleges across the state. I think RPCC's tuition and fees is lower than the...

a. When did your ancestors come to the United States?

d. What language(s) did they speak?

e. What difficulties did they encounter?