Homework Help: Public finance

Posted by Anna on Tuesday, September 25, 2007 at 7:51pm.

Please help me understand the problem provided below and suggest a solution. I thank you for your time and cooperation.

Consider a public goods problem in which each person has the same income M and preferences as given by
Uj=ln(g1+...+gN)+3ln(Cj)
Assume for simplicity that the price of both goods is equal to one.
a) Solve for the privately optimal value of g for each individual.
b) Solve for the socially optimal value of g for each individual.

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