Question

2. Suppose that two people live in Traverse City, Michigan Bert and Ernie. In the winter, the snow is so heavy and frequent that the city is considering adding heating elements under the sidewalk to melt the snow on the sidewalks in order to make them passable. This affects all of the residents. The marginal cost of heating one block of sidewalk is $40. (MC 40.) Use the following demand curves in your answer as needed, suppose that Q is blocks of sidewalk: Bert's: P, 30-Q Ernie's: P, 22-20Q a) What 2 criteria must a public good meet? List and define them b) Explain how heated sidewalks meet these two criteria. c) Would either Bert or Ernie decide to privately provide the ublic good? Justify your answer d) Draw the market demand for the public good. Denote the area where both consumers are willing to pay for additional heated sidewalks "A" and the area where only one of them is willing to pay "B." Label all axes, intercepts, kink points, and slopes e) What is the socially optimal quantity of heated sidewalks? f) Explain the free rider problem g) Explain how the free rider problem can undermine Pareto Efficiency in the market for public goods. Your answer should refer to the Samuelson Condition.

Answer 1

Ans :- Suppose that two people live in Traverse City, Michigan- Bert and Ernie. In the winter, the snow is so heavy and frequent that the city is considering adding heating elements under the sidewalk to melt the snow on the sidewalks in order to make them passable.

Solution ÷- blic o common people. Public aoods aee no Specitić, they e Senečic in nałure and og mass. One o dot the. public good is thal it Mu't got eveybody . That or state can be excluded jtom its disect Chačaclečistic 영 the Public goods is hat, it is Some ρhysical oč Logical quantity he public nobody can be excluded dreom ihe consump a public Jo«s. This meani, no individu«l ot the countay Consumpion ll ci2ens have equal eight upon he. Consumption o the ρublic good.The Second Impo tank not Sca^ce, and thetejoee, the consumpHon od goods do no teduce the avclable uane ' othec conSumess b) Heated Sidewalks cee public oods and meet both it> essential Criteria. Heated sidewalks oae constsucled so that Snow can be easily melted dusing uinte , This meanT that any individuq1 ho walk th sough hose lanes is dieett binedited. Thc goveenment has not Imposed an e st gictionr on the walkin, aryce.att any patlicula* individual htough lanes, Anybody can wadlk through those lanes easily and hassle ytee due to the heated Sideways. he**joec this good is /tot public ConsumpHon 9t all and not estさicted

Secondly, this jood, *teoe the welking th zough the Lanes, ir geneic and idde individualr walk thtough the Lane , this will eeduce the lane Hoz the othez individuals. Eve*y body (un enjoy aj much waln though the lanes as muth as they sanA, and it will still not educe the available quantiły od the qod hečt aood. h«n they const*uct o build a heated Lane, they cannotでestict a+build-q the moment ot otherT on the Lane. Any body walkin thou^h the Lanes will enjoy the benefit the eated walkthaough. h5heơ to walk thtoujh hose Laner can do 5o, and theseby enjoying consuming dicectly Some, the benetits odthe cannot ptovide 4 he public goed in pivate munnez Tris mears, anybody who w ble ood s Hoz evezybodyr consumption we can see lhe ma*ket deman] £ cure goe the public good above Here the Guantly o the good is denoted in the x-axis, and ihe denotes the pxỉce and au an tity

ett C denotes the morket demand publić ood. Can be seen that ina public qo0ds, DE th e de mand the good i5 vey