Demand Curves for Public Goods
Adam and Eve live on two sides of the Garden of Eden, a small suburban development. After they move in, an old PCB dump is discovered between their houses. If X total v tons of PCBs are removed from the dump, Adam and Eve have a true willingness to pay (WTP) to finance a cleanup as follows:
a. Adam's WTP is higher than Eve's. Does this necessarily imply that Eve is less concerned than Adam about exposure to PCBs? Why or why not?
b. Draw one diagram illustrating the two individuals' demand curves for cleanup and the total demand for cleanup in the neighborhood. What is the total WTP for 3 tons of cleanup? For 4 tons?
c. If cleaning up 2 tons were to cost $12, is the WTP in this small community sufficient to finance it? What are the two potential reasons a voluntary cleanup might nevertheless fail?