What is the economically efficient output level

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Suppose there are two types of consumers of a public good. There are 5 consumers with demand Q = 60 − p and 10 other consumers with demand Q = 100 − p. Assume that the marginal cost of the public good is equal to 200. Answer the following questions.

a) What is the competitive market equilibrium?

b) What is the economically efficient output level?

c) Illustrate your answers in b) and c) on a graph and show the deadweight loss of the market equilibrium.

Reference no: EM131387955

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