Reference no: EM133078454

Suppose Adam(A) and Beth(B) live on either side of a flower garden that they own in common (public good for both). Their private marginal benefits (MWTPs) are given as follows:

MBA : QA = 6 + 1/2 P

MBB : QB = 3 + 1/3 P

The marginal cost of tending the garden is given as follows:

MC : Q = -1 + 1/2 P

3.1. We assume there is no government intervention and a lack of cooperation between the neighbors. Draw each person's the marginal benefits curves, and marginal cost curve. (Please follow the economics covention, i.e. the horizontal axis measures the quantity of the public good, and the vertical axis measures the price or MWTP, or MC of the public good).

3.2. Find the equilibrium provision of the public good without government intervention and cooperation between the neighbors, i.e. private provision of a public good. And explain briefly.

3.3. From now, we assume there is government intervention or cooperation between the neighbors, i.e. efficient provision of a public good. Add the social marginal benefit curve in the graph you draw in 3.1. Find the efficient provision level of the public good.

3.4. Compare private provision of a public good with Efficient provision of a public good. Which one is more efficient? Explain briefly