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Question: There are three consumers A, B and C. Consumer A is willing to pay 40-.25F dollars for a unit of flowers for the public square, B is willing to pay 75-.25F dollars for a unit of flowers, and C is willing to pay 60-.25F for a unit of flowers. If the cost of flowers is constant at $100 per unit what is the pareto optimal quantity of flowers to put in the square? Suppose that individual A pays $25 per unit, individual B pays $50 per unit cost and C pays $25. Will the group unanimously agree to the efficient level of F? If not, what must each person pay per unit for agreement to occur? Now suppose that individual B lies about his preferences; stating a willingness to pay of 30-.25F. If unanimous agreement occurs how many units of flowers are provided and what does each person pay? Compare this situation to the case where each tells the truth.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M92582901

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