Asked by Chelsea Garcia-Perez on Apr 26, 2024
Verified
Three individuals consume a public good, and their demands are expressed as:
P1 = 1.5 - 0.005Q (for Q < 300);
P2 = 4.5 - 0.007Q (for Q < 643);
P3 = 3.0 - 0.002Q (for Q < 1500),
where P represents price in dollars per unit and Q represents output in units per day. The marginal cost of providing the service is given as a constant $5.00 per unit. Determine the efficient level of output of this public good.
Public Good
A good that is non-excludable and non-rivalrous, meaning its consumption by one individual does not reduce its availability to others and people cannot be effectively excluded from using it.
- Identify the distinctions between public goods and common property resources, including a discussion of their particular features and the difficulties in provisioning.
- Use economic theory principles to assess the repercussions of public goods on social welfare, emphasizing the complications arising from free-rider issues.
Verified Answer
RJ
Raymart Joseph SindacApr 27, 2024
Final Answer :
The efficient level occurs where the total demand curve intersects MC. The total demand is the vertical sum of the individual demands. The following curve applies for output up to 
Demand P = 9.0 - 0.014Q. (0 ≤ Q ≤ 300)
The efficient output of the good is determined at the intersection of demand and Mc.9.0 - 0.014Q = 5.00
Q = 285.7 or 286 units per time period
For output rates above Q = 300, only the second and third demands apply, and for outputs above Q = 643, only the third demand applies.
Demand P = 9.0 - 0.014Q. (0 ≤ Q ≤ 300)The efficient output of the good is determined at the intersection of demand and Mc.9.0 - 0.014Q = 5.00
Q = 285.7 or 286 units per time period
For output rates above Q = 300, only the second and third demands apply, and for outputs above Q = 643, only the third demand applies.
Learning Objectives
- Identify the distinctions between public goods and common property resources, including a discussion of their particular features and the difficulties in provisioning.
- Use economic theory principles to assess the repercussions of public goods on social welfare, emphasizing the complications arising from free-rider issues.