3. Suppose there are two individuals and two time periods. The demand (marginal willingness pay) for a public resource is given by: Individual A Individual B Demand at time 0 WTPA0 = 3-Q WTPB,0 = 4-2Q Demand at time 1 WTPA,1 = 6-Q WTPB,1 = 8-2Q Furthermore, suppose that it is optimal to provide 1 unit of the resource today (at time 0) and 3 units of the resource at time 1. Assuming a discount rate of 3%, what is the present value of th (aggregate) benefits of this resource?

3. Suppose there are two individuals and two time periods. The demand (marginal willingness pay) for a public resource is given by: Individual A Individual B Demand at time 0 WTPA0 = 3-Q WTPB,0 = 4-2Q Demand at time 1 WTPA,1 = 6-Q WTPB,1 = 8-2Q Furthermore, suppose that it is optimal to provide 1 unit of the resource today (at time 0) and 3 units of the resource at time 1. Assuming a discount rate of 3%, what is the present value of th (aggregate) benefits of this resource?

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter5: Difficult Cases For The Market And The Role Of Government

Section: Chapter Questions

Problem 5CQ

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