Cindy and Dan share a public good G. Cindy's preferences are Uc = Xc + 2G^1/2, and she has income Mc. Dan has preferences Ud = Xd + 8G^1/2, and he has income Md. Both X and G have a price of 1.
a. What is the Pareto efficient level of G?
b. Dan suggests they finance the Pareto efficient level of G by each paying half the cost. WouldCindy agree to this? That is, is Dan's suggestion a Pareto improvement over having G=0?
c. Instead Cindy would implement the Lindahl solution. What share of the Pareto efficientlevel of G would Cindy pay under this solution?