Unformatted text preview: dog(s) from the animal shelter. The marginal cost of acquiring and maintaining each dog is given by MC = 18. Consider the dog a pure public good in their apartment. Each individual’s demand function for dogs is given as follows (D is the number of dogs): Amy MB A = 2 - D Brad MB B = 4 - D Carlos MB C = 15 - D (a) What is the market outcome? Is it efficient? Why or why not? (b) Now assume the three roomies can make collective decision, and share the costs of acquiring and maintaining the dog(s). What is the Lindahl equilibrium? What are the Lindahl prices? Is the Lindahl equilibrium Pareto efficient? Why or why not? (c) Now assume the three roomies decide to vote on how many dogs to adopt. Each one pays 1/3 of the costs. What is the voting equilibrium under majority rule? Is the voting equilibrium Pareto efficient? Explain....
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This note was uploaded on 10/12/2009 for the course ECON 290 taught by Professor J liu during the Fall '06 term at Simon Fraser.
- Fall '06
- J Liu
- Public Good