Question - A collectivity consists of three persons, A, B, C. Demand for some collectively provided service, x, being for person A, P = 40/x; for person B, P = 20/x; and for person C, p = 10/x. The marginal cost is 10.
(i) What is the SMB (social marginal benefit) function/curve for this community?
(ii) What would be the socially efficient level of x according to the Benefit principle or Samuelson condition?
(iii) What would be the level of x according to majority rule with equal head tax?
(iv) Did the majority rule in democracy produces efficient amount of public good?