There are two groups in a community. Their demand curves for public television i
ID: 1124389 • Letter: T
Question
There are two groups in a community. Their demand curves for public television in hours of programming, T, are given respectively by W1 = $300 T W2 = $420 2T. Suppose public television is a pure public good that can be produced at a constant marginal cost of $300 per hour. (a) (2 points) Graph the two groups’ marginal willingness to pay as well as the total willingness to pay. Label the axes and the curves in the graph. (b) (4 points) What is the efficient number of hours of public television? (c) (4 points) How much public television would a competitive private market provide?
Explanation / Answer
Answer B:- The condition for receiving efficient hours on public TV can be written as , MC = MB = W.
W1 = $2OO - T = 200, T = 0
W2 = $240 - T = 200, T = 40
W3 = $320 - 2T = 200, T = 60
When T = 60, it can fits for all of the W.
So, the T = 60.
Answer C:- b. It is clear that all the Ws are basically the demand of audience and we can assume the price is the supply. Then, in order to get the supply surplus, we can add these two equations below
760 – 4T = P
P = 200
Supply surplus = (140 + 190)* 0.5*200 = 33,000