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There are 3 people with different marginal willingness to pay schedules for levels of environmental quantity...

There are 3 people with different marginal willingness to pay schedules for levels of environmental quantity Q: A’s marginal WTP=$20-Q; B’s marginal WTP=$10-Q; and C’s marginal WTP=$5-Q. The marginal cost is given by MC=3+Q. 1. Please draw each person’s marginal WTP curve, the aggregate marginal WTP curve, and the marginal cost curve. 2. Please calculate the optimal provision level of Q and find the optimal provision point in your graph. Are there any free riders? 3. Please calculate the actual provision level of Q when there is no government intervention. Explain your results. Are there any free riders?

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Rahul Sunny answered 1 year ago
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