Question

The purpose of this exercise is to show how the output and costs of private and public goods change as demand increases. Production is where MC equals the demand or total value of the good, total production must receive a majority of voting support and it must raise enough taxes to cover costs Private Good. In previous assignments, the competitive solution at P-MC $3 resulted in Q 7 and TC $21. Assume the population doubles to six people by adding the same three people as below. (hint: some values are filled in to assist in the calculation Price (S/loaf of bread per week) 4 #12 #2 0 #3 4 4 0 0 Market Demand Qd- 18 Competitive Solution: P- MC-S3, Qc- Total Cost of Production- Res. Total Valuation #1 a- ,#2a Vote (Y or N) Impact on Budget- Total Taxes - Total Cost- Total Taxes from each resident-TC/6 = Doubling the population resulted in (more than or less than) doubling of output and (more than or less than) doubling of total cost.

Answer 1

Market demand is the sum of individual demands of all consumers.

1423423 2413413 3313313 4312312 5302302 6202202 8 720-201 2

Competitive solution is where P= MC = $3, Q = 14.

TC = 14*3 = $42

Tax from each resident = TC/6 = $7

#2a #3a #1b #2b #3b #1a Total Valuation Tax paid TV Tax Vote -4 4 6 4

Impact on budget = 42 - 42 = 0