SIMON FRASER ECON290 Tut6 answer

SIMON FRASER ECON290 Tut6 answer - Economics 290: Canadian...

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Economics 290: Canadian Microeconomic Policy Tutorial #6 (Week of March 8) 1. Guards patrolling a shopping mall protect the mall’s two stores: computer store and ice cream shop. Security services are pure public goods. The marginal cost of guards is $20 per hour. The computer store’s demand function for guard is MB C = 30 – 5H, where H is the hours of guarding services. The ice cream shop’s demand function for guards is MB I = 8 – H. (a) What is the market equilibrium amount of guards? (b) What is the efficient amount of guards? (c) The mall owner decides provide the guarding services, but two stores have to pay to cover the cost. What are the Lindahl prices that would result in the efficient amount of guards? (a) H=2 (b) H=3 (c) P C =15. P I =5 2. Although the marginal cost of producing a pure public good is always positive, some consumers can enjoy the benefit of pure public goods at zero marginal costs. Explain this apparent paradox, if there is one. No paradox here. The cost of providing a pure public good is always positive. As
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SIMON FRASER ECON290 Tut6 answer - Economics 290: Canadian...

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