Econ 410 Public Finance

Feb 3rd, 2012
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California State Polytechnic University - Pomona
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This is for a class in Economics relating to Public Finance. All the answers are right and I showed my work on every single problem.

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3. Bill's demand for hamburgers (a private good) is Q = 20 - 2P and Ted's demand is Q =10 - P. A. Write down an equation for the social marginal benefit of the consumption of hamburger consumption. The social marginal benefit from the Qth hamburger is the willingness of society to pay for the hamburger. To compute it, I was first able to find the social demand curve for hamburgers by summing individual demands horizontally: Q = (20 - 2P) + (10 - 3P) = 30 - 3P. Inverting this gives P= 10 - Q/3. The willingness of society to pay for the Qth hamburger is 10 - Q/3. B. Now suppose that hamburgers are a public good. Write down an equation for the social marginal benefit of hamburger consumption. For public goods, I just didn't add quantities horizontally; I was able to add prices vertically. For Bill, Q = 20 - 2P; solving for P yields P= 10 - 0.5Q. For Ted, Q = 10 - P, so P= 10 -Q. Summing vertically, total P= (10 - 0.5Q) + (10 - Q) = 20 - 1.5Q. 11. Suppose 10 people each have the demand Q= 20 - 4P for streetlights and 5 people have the demand Q= 18 - 2P for streetlights. The cost of building each streetlight is 3. If it is impossible to purchase a fractional number of streetli

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