Question

Pa and Pb represent the prices that citizens (a) and (b), the only two people in this nation, are willing to pay for additional units of quantity(Qc) of the public good. Qs represents the quantity of the public good supplied by the government at each of the collective prices.
Refer to the information below. if the collective willingness to pay for an additional unit of this public good is $6, then the collective quantity demanded will be :_____________.
Qc Pa Pb Qs
1 $4 $5 5
2 3 4 4
3 2 4 3
4 2 3 2
5 1 2 1
a) 4 units and the socially optimal quantity supplied will be 2 units
b) 1 unit and the socially optimal quantity supplied will be 5 units
c) 2 units and the socially optimal quantity supplied will be 4 units
d) 3 units and the socially optimal quantity supplied will be 3 units

Answer 1

Answer:

d) 3 units and the socially optimal quantity supplied will be 3 units

Explanation:

A public good is a good that is non excludable and non rivalled in consumption. This means that the use by a person does not reduce availability to others.

Willingness to pay is the highest amount a person is willing to pay.

If the collective willingness to pay is $6, then demand would be 3, because it is at this quantity that total willingness to pay equals $3.

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