Make a price quantity chart for each consumer. Then add a column showing the tot
ID: 1219405 • Letter: M
Question
Make a price quantity chart for each consumer. Then add a column showing the total quantity demanded for a private good. Next show the quantity price chart showing the total demand for a public good. Graph all 5 demand curves on the same graph. If the marginal cost is $4 a unit how many units should be bought if the good is a private good? How many units would each individual buy? C + b - t If the marginal cost is $4 a unit, how many units should be bought if the good is a public good? How much would each person be willing to pay? consumers of public goods have the same incentives to reveal their true luxation's of Public goods as they do of Private goods? Why or why not?Explanation / Answer
A public good is an entity that provides benefits to all individuals simultaneously and whose enjoyment by one person in no way diminishes that of other. The former feature is known as non-rivalry and the latter is referred to as non-excludability in consumption. A private good on the other hand is privately owned and used when the owner purchases it
Following is the table depicting the charts related tp public and private good
Private good and its provision
Public good and its provision
Price
Qa
Qb
Qc
Q
Quantity
Pa
Pb
Pc
P
0
10
18
14
42
0
10
6.00
28
44.00
2
8
12
13
33
2
8
5.33
24
37.33
4
6
6
12
24
4
6
4.67
20
30.67
6
4
0
11
15
6
4
4.00
16
24.00
8
2
-6
10
6
8
2
3.33
12
17.33
10
0
-12
9
-3
10
0
2.67
8
10.67
12
-2
-18
8
-12
12
-2
2.00
4
4.00
14
-4
-24
7
-21
14
-4
1.33
0
-2.67
16
-6
-30
6
-30
16
-6
0.67
-4
-9.33
18
-8
-36
5
-39
18
-8
0.00
-8
-16.00
20
-10
-42
4
-48
22
-12
-48
3
-57
24
-14
-54
2
-66
26
-16
-60
1
-75
28
-18
-66
0
-84
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Note that When the marginal cost is $4, a private good is purchased by all there consumers in difference amounts according to the value they placed. A buys 6 units, B also buys 6 units while C buys 12 units. This is true since at these levels Price = Marginal cost.
In case of public good, whose demand is determined not individually but collectively, when marginal cost is $4, the cumulative price is $4 when the total quantity of a public good demanded is 12 units.This is the socially optimum level of output but not the feasible one since A and B are not going to pay $4. To A, 12 units is least desirable among the three consumers as she values it negatively. B can at most contribute $2, However, C can definitely purchase 12 units of public good. So 12 units of the public goods will be purchased by C and A and B will free ride.
As we have seen, A and B notice that C purchases the good and so the public good is provided even though they contributed nothing. This encourages them in particular, and all the people in general, to conceal their true preferences.
Nobody has any incentive to reveal his or her true preferences. They would not like to split the cost of any group purchase equally, because there is no quantity for which they would all have the same price preference
In general, public goods are under-supplied unless each user can be induced to contribute his or her true marginal WTP, but there is no practical market mechanism to accomplish this.
Private good and its provision
Public good and its provision
Price
Qa
Qb
Qc
Q
Quantity
Pa
Pb
Pc
P
0
10
18
14
42
0
10
6.00
28
44.00
2
8
12
13
33
2
8
5.33
24
37.33
4
6
6
12
24
4
6
4.67
20
30.67
6
4
0
11
15
6
4
4.00
16
24.00
8
2
-6
10
6
8
2
3.33
12
17.33
10
0
-12
9
-3
10
0
2.67
8
10.67
12
-2
-18
8
-12
12
-2
2.00
4
4.00
14
-4
-24
7
-21
14
-4
1.33
0
-2.67
16
-6
-30
6
-30
16
-6
0.67
-4
-9.33
18
-8
-36
5
-39
18
-8
0.00
-8
-16.00
20
-10
-42
4
-48
22
-12
-48
3
-57
24
-14
-54
2
-66
26
-16
-60
1
-75
28
-18
-66
0
-84
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