Question

Bonus 8 Imagine there are two students who are deciding how to spend their time between consum- ing a private good, studying alone (A), and a pubhc good, studying together (T). Each student has utility function U(A, T) = 2 log(A,) +log(T). This utility depends consumption of studying alone and consumption of the total amount of studying together, which is the sum of how much time each student invests in studying together: Ti +T= T Each student has 100 hours to allocate (i.e. A +Ti= 100). on private What will be the equilibrium levels of A and T in this market if the students make private decisions? 8.1 8.2 What is the socially optimal equilibrium in this market? 8.3 Will studying together be under-provided, over-provided, or provided at the right level in the equilibrium in which the students make private decisions? Please explain.