5.c.ii)Free-ridership is a person who seeks to enjoy the benefits of a public good withoutcontributing anything to the cost of financing the amount made available. Free riderswant to enjoy the benefits of such goods while hoping for someone else to pay for it.Under a system of voluntary contributions when large numbers of people areinvolved, attempts by individuals to play the free-rider strategy almost guarantee thatthe equilibrium amount of pure public good will be less than efficient amount. Hence,voluntary cost sharing of public goods will result in insufficient amount of publicgoods being produced relative to the efficient amount. 5.d)The demand for pure private goods is the sum of the quantity demanded by allconsumers at each possible price per unit of the good. Since the cost is at RM400,Household A demands 2 drainage system. It is the quantity for which the marginalbenefit, MBA= RM400. Household B demands 1 drainage system because it is thequantity for which the marginal benefit, MBB= RM400. Finally, household C willingto buy 2 units of drain at RM400. Therefore, MBC= RM400. Add all up, we could getthe total demand by the households is 5 units of drainage system.MC = RM400,D = MBA+ MBB+ MBC= 2 + 1 + 2= 5 units of drainage
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Public Good, Externality, PROFESSOR ZAHARIAH MOHD ZAIN, household C refuse