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What is the socially optimal level of p

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Reference no: EM131483543

Suppose you are studying a community that has 10 individuals. Each individual has the utility function U(c, p) = c + ln(p).

a. Suppose each individual has an income of 30. P is a unique good because its a public good. This means that if I purchase police, my neighbors gets to consume whatever I purchase, and vice versa. How much c does each individual consume consume, and how p does everyone consume if the price of c is 2, and the price of p is 20?

b. What is the socially optimal level of P, based on the Samuelson condition?

c. How does your answer to part b, compare to a? What is a way we could get people to purchase more police?

Reference no: EM131483543

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