Suppose Chen has demand Q = 40 – 2P for streetlights and Abby has the demand Q = 10 – (1/2)P for streetlights. The cost of building each streetlight is $19. How many streetlights are socially optimal? Compare this socially optimal quantity with the quantity that would be privately purchased.
A. How many streetlights would be privately purchased?
B. Now suppose that streetlights are a public good. Write an equation for the market demand curve of streetlight consumption.
C. How many streetlights are socially optimal?
D. Compare this socially optimal quantity with the quantity that would be privately purchased
E. If the socially optimal quantity is not equal to the quantity that would be privately purchased, how could government intervene?