CALCULUS ECONOMICS

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?

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