Answer to Question #270074 in Microeconomics for khashayar

Question #270074

The demand curve for a public park for two consumers who represent society is given by:

𝑃 = 150 βˆ’ 𝑄𝐷1, 𝑃 = 250 βˆ’ 𝑄𝐷2

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 €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.


1
Expert's answer
2021-11-26T12:20:47-0500

"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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