Question

Public Good This good being distributed is a pure public good. Once produced it can be offered to anyone without a reduction in quantity. A firm offers videos online to customers. The table below lists three customers and the value they place on the number of movies offered each week. It costs the firm $8 per video to supply.

# of videos per week

                                    1          2          3          4          5          6          7

Value to Cust. #1        6          5          5          5          4          4          4

Customer #2                2          2          2          1          1          1          0

Customer #3                4          4          3          3          3          2          2         

Total Value of good               __        __        __        __        __        __        __

Competitive Solution: Total Value = MC, Qc = _____

Total Cost of Production = _____Total Taxes from each resident = TC/3 = _____

Resident Total Valuation =                 #1 = _____, #2 = _____, #3 = _____

Vote on Output level (Y or N)           #1 = _____, #2 = _____, #3 = _____           

Impact on Budget = Total Taxes – Total Cost = _____ - _____ = _____

Answer 1

Solution Table:

Videos per week	1	2	3	4	5	6	7
Value to Customer #1	6	5	5	5	4	4	4
Value to Customer #2	2	2	2	1	1	1	0
Value to Customer #3	4	4	3	3	3	2	2
The total value of good	12	11	10	9	8	7	6
Competitive solution	Total Value=MC=8	Qc=5
Total Cost of production=5×8=40
Total taxes from each resident=TC/3=13.3
Residents total valueation=	#1=4	#2=1	#3=3
Vote on output level=	#1=N	#2=N	#3=N
Impact on budget=Total taxes-TC=0-40=-40