The city council is considering putting on a fireworks display. The willingness to pay for this public good is in the below matrix. If the display costs $30 should it provide this public good? If yes, how much should each, ratepayer contribute to the cost of the display?
Ratepayer Willingness to pay
A $25
B $15
C $10
The three individual willingness to pay functions for a public good are given by: w_1;P=100-0.5Q, w_2;P=80-Q & w_3;P=60-1.5Q. Specify the total willingness to pay function (W) for this public good. Then, given: =30Q , calculate the optimal quantity of this public good the government should provide.
Continuing from b. assume that the government is now able to turn this public good into a private good. Instead of providing it for free, it provides it according to profit maximisation. What is the loss in consumer surplus due to this change in policy?
Assume you work for one of five firms that have submitted applications to the city council to operate a local amenity for the upcoming year. The annual running cost is given as: (C=20Q+500) while the market demand curve for this amenity is given by: D;P=200-2Q. The winning applicant may charge any price they choose. The CEO of your firm has asked you to calculate how much to spend on lobbying in an attempt to secure this contract.