Question

i know the answer but i need explanation.

4. The monthly rental rate for a satellite dish antenna is $200. The maximum marginal benefit that any resident of a condominium community will obtain per month from the antenna is $50. There are 100 residents in the community, none of whom values the antenna at less than $25 per month. Assuming that the antenna is a pure public good for residents of the community, a. each resident of the community will rent his own antenna. b. it is inefficient for the community to rent an antenna. c. it is efficient for the members of the community to rent an antenna for their common use. d. it is efficient for each resident to rent his own antenna.

Answer 1

Q4) option C)

MC of satellite dish = 200

For public good, the market demand curve is Vertical summation of individual demand curves, ( at given level of Q, we take summation of individual willingness to pay)

So for Q = 1 ( antenna)

So combined valuation of 100 people = 100*25 = 2500

At eqm level of provision of public good, MC cuts the market demand curve

So it is efficient to provide public good, since combined MB cuts MC

.

• d is wrong, bcoz each resident valuation is less than the rental rate

So each resident will not rent his antenna, a is false