Categories
Economics

Public Sector Economics

Assignment 1

MVA = 10 – 0.5G

MVB = 15 – 0.5G

MVC = 20 – G.

  1. If the amount of G available can be increased at a constant marginal cost of 5

per unit, what is the efficient amount of G if Ann, Bob, and Claire are the only

people who will consume any of it?

The efficient amount is equal to solving the above equations- or the efficient amount is equal to 7.

  1. If Ann, Bob, and Claire were each able to provide units of G individually (as in

the case of roadside litter pickup, for example), how much G would be

provided by each of them if they acted independently of each other?

Ann- 5 units

Bob- 6 units

Claire- 7 units

  1. If the marginal cost of G were 10 per unit, how much G would be provided by

each of them if they acted independently of each other?

Ann= 10-.5(10) = 5

Bob= 15-.5(10) = 10

Claire= 20- (10)= 10

  1. If the marginal cost of G were 10 per unit, what would be the efficient level of

provision of G?

Ann= 10-.5(10) = 5

Bob= 15-.5(10) = 10

Claire= 20- (10)= 10

=10+10+5=25

  1. If Ann, Bob, and Claire agreed to choose the level of G by simple majority

voting, and if they agreed to share the cost of G equally, what level of G would

be chosen?

The cost chosen would be equal to 20.