Question 3 The following table shows how the marginal benefit of a service varies for...
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Question 3 The following table shows how the marginal benefit of a service varies for four consumers: MARGINAL BENEFIT IN DOLLARS $ Consumers Quantity Alice Ben Carolyn Don WN 1 2 3 4 2000 1600 1200 800 1600 1200 800 400 1200 800 400 200 800 400 200 100 a. Suppose the service is a pure private good and is sold in a competitive market with the only buyers being the four people whose marginal benefits are shown in the table. If the market price of the product is $800, what is the quantity demanded? (8 marks) b. Suppose the service is a pure public good with the only consumers being the four people whose marginal benefits are shown in the table. What is the marginal social benefit of two units of the service? (8 marks) C. If the marginal social cost of the good is $4,000, what is the efficient output assuming that it is a pure private good? (7 marks) d. If the marginal social cost of the good is $4,000, what is the efficient output assuming it is a pure public good? (7 marks)
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