pubsec-hintsps3

pubsec-hintsps3 - Hints for Problem Set 3 a The social...

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Hints for Problem Set 3 l. a) The social marginal benefit curve is just the market demand curve, which is the horizontal sum of Bill's demand and Ted's demand. b) For a public good, the social marginal benefit curve is the vertical sum of Bill's demand and Ted's demand. If you plot Bill's demand and Ted's demand, you should find that Bill's horizontal intercept is 20 and Ted's horizontal intercept is 10. For quantities between 0 and 10, to get the vertical sum of the 2 demands, solve each person's demand curve for Q and then add. For quantities between 10 and 20, only Bill attaches a positive benefit to these quantities, so the SMB curve is just Bill's demand curye for these quantities. 2. For this one, the safest procedure may be trial and error. Solve each demand curve for P. Then plug in Q:1 to each. You should find that group one, at Q:l, has a P (a marginal benefit for one person) : $4.75. Since there are l0 of them,
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This note was uploaded on 10/15/2011 for the course ECON 134 taught by Professor Coiner during the Spring '11 term at Brandeis.

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pubsec-hintsps3 - Hints for Problem Set 3 a The social...

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