economically efficient level of production of the good
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There are three consumers of a public good. The demands for the consumers are as follows:
Consumer 1: P1 = 60 â?" Q
Consumer 2: P2 = 100â?" Q
Consumer 3: P3 = 140 â?" Q
where Q measures the number of units of the good and P is the price in dollars. The marginal cost of the public good is $180.
a) What is the economically efficient level of production of the good? Illustrate your answer on a clearly labelled graph.
b) How would your answer change if the marginal cost of the public good is $60?
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There are three consumers of a public good. The demands for the consumers are as follows:
Consumer 1: P1 = 60 - Q
Consumer 2: P2 = 100 - Q
Consumer 3: P3 = 140 - Q
where Q measures the number of units of the good and P is the price in dollars. The marginal cost of the public ...
Purchase this Solution
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