Question

Suppose there are two consumers of a public good, one with a marginal benefit of 10-Q;...

Suppose there are two consumers of a public good, one with a marginal benefit of 10-Q; the other a marginal benefit of 30-2Q, where Q is the quantity of that public good. The public good can be provided with MC = 20.

a) how many quantities of the public good will be provided assuming that the low-demand consumer will free ride on the high-demand consumer?

b) what is the sum of total consumer surplus to the two consumers under a private market where the firm price at MC, assuming that one of the consumer free-ride on the other one?

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