« previous next »

Author Question: The optimal provision of a public good occurs when the sum of the marginal rate of substitution for ... (Read 113 times)

nummyann

  • Hero Member
  • *****
  • Posts: 576
on: Jul 1, 2018
The optimal provision of a public good occurs when the sum of the marginal rate of substitution for all members of society equals 1, the marginal rate of transformation.
 
  What is the relationship between the marginal rates of substitution in the competitive market? Use this relationship to explain why too few public goods are provided in the competitive market.

Question 2

The requirement that all drivers must carry auto insurance reduces
 
  A) moral hazard.
  B) the effectiveness of signaling.
  C) adverse selection.
  D) the chance of auto accidents.


todom5090

  • Sr. Member
  • ****
  • Posts: 328
Reply #1 on: Jul 1, 2018
Answer to Question 1

The competitive market allocation occurs where the MRS for all members of society are equal to 1. This implies that the MRS for each individual is too large relative to the optimum. In order to reduce the MRS such that the sums add up to one, we need to increase the consumption of the public good and decrease the consumption of the private good. This will reduce the MRS for each individual.

Answer to Question 2

C


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question

nummyann

  • Hero Member
  • *****
  • Posts: 576
Reply #2 on: Jul 1, 2018
Thank you :)


todom5090

  • Sr. Member
  • ****
  • Posts: 328
Reply #3 on: Jul 1, 2018
Happy to help you


« previous next »
 

Did you know?

The first documented use of surgical anesthesia in the United States was in Connecticut in 1844.

Did you know?

Hippocrates noted that blood separates into four differently colored liquids when removed from the body and examined: a pure red liquid mixed with white liquid material with a yellow-colored froth at the top and a black substance that settles underneath; he named these the four humors (for blood, phlegm, yellow bile, and black bile).

Did you know?

Common abbreviations that cause medication errors include U (unit), mg (milligram), QD (every day), SC (subcutaneous), TIW (three times per week), D/C (discharge or discontinue), HS (at bedtime or "hours of sleep"), cc (cubic centimeters), and AU (each ear).

Did you know?

Asthma attacks and symptoms usually get started by specific triggers (such as viruses, allergies, gases, and air particles). You should talk to your doctor about these triggers and find ways to avoid or get rid of them.

Did you know?

ACTH levels are normally highest in the early morning (between 6 and 8 A.M.) and lowest in the evening (between 6 and 11 P.M.). Therefore, a doctor who suspects abnormal levels looks for low ACTH in the morning and high ACTH in the evening.

C, A nurse can also administer the medication by setting the dose and rate with an electronic infusi C, A nurse can also administer the medication by setting the dose and rate with an electronic infusi
Comparison of Principles of Abstinence-Only and Comprehensive Sex Education in the Public School Sys Comparison of Principles of Abstinence-Only and Comprehensive Sex Education in the Public School Sys
Until the 1960s, the South’s public facilities were segregated. Some were reserved for whites, ... Until the 1960s, the South’s public facilities were segregated. Some were reserved for whites, ...
Energy radiated by substances occurs over a wide range of wavelengths. Energy radiated by substances occurs over a wide range of wavelengths.
Older Adults Benefit from Good Nutrition and Physical Activity Older adults Older Adults Benefit from Good Nutrition and Physical Activity Older adults
If we make the substitution z=sqrt(x) to ∫sqrt(1-sqrt(x)) dx, the resulting integral is If we make the substitution z=sqrt(x) to ∫sqrt(1-sqrt(x)) dx, the resulting integral is
Video: Exercise and cardiac output

For a complete list of videos, visit our video library