Question

1.Suppose that Ben’s demand for fireworks (which for now we assume to be a private good) is QB= 21 − 6P and Jerry’s demand is QJ= 6 − 3P.a.What is the social marginal benefitof firework consumption? That is, what is the willingness of society (society in this problem and in bmeans Ben + Jerry, and this question boils down to horizontal summation of quantities demanded vs vertical summationof prices or willingness to pay)to payfor fireworks? Write down your answer as P being a function of Q (e.g., Jerry’s willingness to pay for fireworks is P = 2 –QJ/3, which is just his individual demand inverted to be in terms of Q rather than P).(10pts)b.Suppose instead, as is more likely, that fireworks are a publicgood. What is then the social marginalbenefitof firework consumption? (again, this boils down to horizontal vs vertical summation)

Answer 1