Suppose there are only two people in society. The demand curve for person A for

Question

Suppose there are only two people in society. The demand curve for person A for mosquito control is given by qA=$100P

For person B, the demand curve for mosquito control is given by qB=$200P

a. Suppose mosquito control is a nonexclusive good – that is, once it is produced, everyone benefits from it. What would be the optimal level of this activity if it could$ be produced at a constant marginal cost of $120 per unit?

b. If mosquito control were left to the private market, how much might be produced? Does your answer depend on what each person assumes the other will do?

c. If the government were to produce the optimal amount of mosquito control, how much would this cost?

d. How much benefit/surplus does person A and person B get from the optimal/government level of production?

Explanation / Answer

Suppose there are only two people in society. The demand curve for person A for

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