What is public good? Explain the argument that the private sector will provide too little of a public good. – GradSchoolPapers.com

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What is public good? Explain the argument that the private sector will provide too little of a
public good.
Homework # 2
Instructions: All illegible answers will be marked incorrect, so please write legibly. If you type
and submit the print out of your homework, you will receive 5 points extra credit. Email
submission will not earn any extra credit. The homework is due before class on Wednesday,
October 7, 2015 for Section B and before class on Thursday, October 8, 2015 for Section A. Late
turn in of the homework is strictly discouraged.
1. What is public good? Explain the argument that the private sector will provide too little of a
public good.
2. Which of the following do you consider pure public goods? Private goods? Why?
a. Wilderness areas
b. Municipal water supply
c. Medical school education
d. Public television program
e. An internet site providing information on airplane schedules
3. What is the condition for determining the Pareto efficient level of public good? Explain in
words the meaning of Pareto efficient level condition of public good.
4. Explain the prisoners’ dilemma game. Why is the free rider problem an example of a
Prisoners’ dilemma situation?
5. Thelma and Louise are neighbors. During the winter, it is impossible for a snowplow to clear
the street in front of Thelma’s house without clearing the front of Louise’s. Thelma’s
marginal benefit from snowplowing services is 12 – Z, where Z is the number of times the
street is plowed. Louise’s marginal benefit is 8 – 2Z. The marginal cost of getting the street
plowed is $16.
Sketch the two marginal benefit schedules and the aggregate marginal benefit schedule.
Draw in the marginal cost schedule, and find the efficient level of provision for snowplowing
services.
6. Suppose there are only two people in society. The demand curve for person A for mosquito
control is given by
QA = 100 – PA
Similarly, for person B the demand curve for mosquito control is given by
Page- 2
QB = 200 – PB
a. Suppose mosquito control is non-rival and non-excludable. What would be the optimal
level of mosquito control if it could be produced at a constant marginal cost of $50 per
unit?
b. If mosquito control were left to the private competitive market, how much might be
produced? What do you conclude?
c. If the government were to produce the optimal amount of mosquito control, how much
will this cost? How should the tax bill for this amount be allocated between the
individuals if they are to share it in proportion to benefits received from mosquito
control?
The following two questions are from the assigned reading, “The Lighthouse in Economics.”
7. Briefly describe the organization of the paper, “The Lighthouse in Economics.”
8. Name the four economists whose works the author frequently refers in the paper, “The
Lighthouse in Economics.”

 
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