Question: suppose three people benefit from a clean gulf of mexico...
Suppose three people benefit from a clean Gulf of Mexico. Individual marginal willingness to pay curves increased quantity of a clean gulf is given by
Person A:MWTPa = 20-4Q
Person B: MWTPb= 30-3Q
Person C: MWTPc= 40-2Q
a) what is the aggregate marginal willingness to pay curve for this PUBLIC good (hint= #1: your answer will have several regions. Hint #2: is it conceptually realistic to have negative marginal willingness to pay? what would this mean?
b) graph the aggregate MWTP curve
c) assume the marginal cost of cleaning up the Gulf of mexico is a constant $45/unit. graph this
d) what is the efficient numner of clean units of the Gulf to provide the 3 people? show this on the graph
e) at the efficient quantity, how much would each individual be willing to pay for an aditional unit (Person A B or C)
f) if we would charge each person the amount that they would be willing to pay for another unit at the efficient quantity, what would the total revenue collected?
g) what would be the cost of producing the efficient quantity of the public good?
h) what would we expect the market to provide the efficient quantity of the public good? why or why not?
i) at the efficient quantity of the public good, what are the net benefits to society? Assume that the only costs are those incurred for the cleanup and that only these 3 people benefit from the cleanup.