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a. Demand Curves for Public Goods Adam and Eve live on two sides of the Garden of Eden, a small suburban development. After they move in, an old PCB dump is discovered in between their houses. If X total tons of PCB's are removed from the dump, the two have a true willingness to pay (WTP) to finance a clean-up equal to: ADAM's WTP = 10 - X and EVE's WTP = 6 - X

b. Draw one diagram illustrating the two individuals demand curves for clean-up, and the total demand for clean-up in the neighborhood. What is the total WTP for 3 tons of clean-up?

c. If cleaning up 2 tons were to cost $12, is their sufficient WTP in this small community to finance it? What are two potential reasons why a voluntary clean-up might nevertheless fail?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9748354

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