PUBLIC FINANCE
Suppose there are 10,000 people in constituency and each is willing to pay $ 10 for each extra well dug regardless of the number of wells dug. If the cost of digging a well is given by C = Q2 + 20Q. Where C is cost and Q is the number of wells.
Required
a. Calculate the Pareto efficiency number of wells to be dug
b. If the government was to dig the wells at a minimal cost, how many wells will it dig and how much will it spend?
c. Suppose the contract of digging wells was to be undertaken by a private organization that is profit oriented and to be financed by a donor, calculate the number of wells that the private firm will dig and the total cost
9 years ago
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