posted by Jenney
Consider a market in which consumption of the good being traded generates a positive externality.
There are 100 identical consumers, each with a utility function given by (1/2)*(q^(1/2))+m +(G^(1/2)) where G denotes the total level of consumption in the market.
The good is sold by competitive firms that produce with a constant marginal cost of 1 $/unit.
QUESTION: What is the difference between the optimal level of total consumption minus the amount of total consumption generated by the market?