Suppose there are two consumers of public good

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1. Suppose there are two consumers of a public good, Barbie (B) and Ken (K). Their demand curves for the good are given by:

Barbie’s Demand: P = 16 – Q

Ken’s Demand: PK = 14 – 2Q

a) Graph Barbie’s demand curve. What is the slope?

b) Graph Ken’s demand curve. What is the slope?

c) Graph the market demand for the public good. Label the region in which only Barbie consumes the good “B” and the region in which they both consume the good “A.”

d) What are the slopes of the demand curves in regions A and B?

e) Suppose the marginal cost is given by the equation MC = 6+Q. What is the socially optimal quantity of the public good?

Reference no: EM13895828

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