Homework answers / question archive / Assume that a small town uses a referendum to overcome the free-ridership problem and determine how its residents might value a new water filtration system for its public water supply

Assume that a small town uses a referendum to overcome the free-ridership problem and determine how its residents might value a new water filtration system for its public water supply

Economics

Share With

Assume that a small town uses a referendum to overcome the free-ridership problem and determine how its residents might value a new water filtration system for its public water supply. The voting results are aggregated by the town's two districts, yielding the following demand estimates: District 1: Q = 160 - 20P, District 2: Q= 60 - 5P2) where Q is the expected percent of copper to be filtered by the system, and P is the price in millions of dollars. Because this is a public good, the two demands must first be written in inverse form and then summed (added together). The reasoning is that, for a public good, each demander is expressing a willingness to pay for the same quantity a. Based on these estimates, determine the town's market demand for this public good, the new filtration system. If the market supply for the system were P = 6 +0.150, what would be the equilibrium price and quantity for the town? b. Paragraph - BIES 0