Derive the market demand curve for public good

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Three individuals consume a public good, and their demands are expressed as:

P1 = 1.5 - 0.005Q (for Q < 300);

P2 = 4.5 - 0.007Q (for Q < 643);

P3 = 3.0 - 0.002Q (for Q < 1500),

where P represents price in dollars per unit and Q represents output in units per day.

a) Derive the market demand curve for this public good. Illustrate it graphically (Hint: the market demand curve is kinked).

b) The marginal cost of providing the service is given as a constant $5.00 per unit. Determine the efficient level of output of this public good. If the MC increases to 10, what is the new efficient level of output?

Illustrate your answers graphically

Reference no: EM132410696

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