The City of Econoville Has 100 Residents Who Each Have

Essay

The city of Econoville has 100 residents who each have the identical demand function for roads: P = 100 - 1.99Q. The marginal cost of providing road area is: MC(Q) = 2,500 + Q. Road area is a public good. That is, if the city of Econoville provides public access to roads, all of the residents can enjoy the roads. If the city of Econoville does not offer public roads, how much area of roads will each individual resident maintain on their own? What is the optimal area of public roads in Econoville? What flat road tax should Econoville implement on residents for units of roads the city provides? With this flat tax, what is the total contribution of each resident for the roads?