The demand curve for a public park for two consumers who represent society is given by:
π = 150 β ππ·1, π = 250 β ππ·2
Graph the two demand curves and show the marginal social benefit curve for this public
park. If the marginal cost of providing the park was β¬240, what would the optimum
provision of this park be? Explain why any quantity above or below this amount would
represent a less than efficient allocation.
"P=150-QD_{1}"
"P=250-QD_{2}"
"MC=\\$240"
"TC=240Q"
Social marginal benefits of Q is;
"MB_{1}+MB_{2}=P_{1}+P_{2}"
The demand for consumer 1 is; "Q<150"
The demand for consumer 2 is; "Q<250"
For consumer 1, the marginal cost represents less than efficient allocation.
"TR=150Q-Q^2"
"TC=240Q"
"TR=TC"
"150Q-Q^2=240Q"
"Q=-90"
For consumer 2;
"TR=250Q-Q^2"
"TC=240Q"
"TR=TC"
"250Q-Q^2=240Q"
"Q=10"
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