Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

Exercise 19

Suppose there are only two people in society. The demand curve for person A for mosquito control is given by
q A a = 100 - P
For person B, the demand curve for mosquito control is given by
q B = 200 - P
a. Suppose mosquito control is a nonexclusive good-that is, once it is produced everyone benefits from it. What would be the optimal level of this activity if it could be produced at a constant marginal cost of $50 per unit?
b. If mosquito control were left to the private market, how much might be produced? Does your answer depend on what each person assumes the other will do?
c. If the government were to produce the optimal amount of mosquito control, how much would this cost? How should the tax bill for this amount be allocated between the individuals if they are to share it in proportion to benefits received from mosquito control?