What is the optimal level of the public good

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Reference no: EM131204548

Consider two consumers with the following demand functions for a public good:

where pi is the price that i is willing to pay for quantity G.

a. What is the optimal level of the public good if the marginal cost of the public good is $25?

b. Suppose that the marginal cost of the public good is $5. What is the optimal level?

c. Suppose that the marginal cost of the public good is $40. What is the optimal level? Should the consumers make an honest statement of their demand functions?

Reference no: EM131204548

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