What is socially optimal price and quantity of streetlights

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Reference no: EM131118559

There are two individuals with demand for streetlights Qd1 = 150 − P and Qd2 = 200 − P. The market supply of streetlights is perfectly elastic at P = 130.

a. What is the price and quantity of streetlights if the market is competitive?

b. Explain why streetlights are a public good.

c. What is the socially optimal price and quantity of streetlights?

d. Using your results, why is a public good considered a market failure?

Reference no: EM131118559

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