Mr. Maurer
AP Economics
Name: ________________________
Unit 5 – Market Failure and the Role of Government
Public Goods
Note: This worksheet is designed to be done simultaneously with the lecture on Public Goods.
If you are doing this outside of class, please download and use the PowerPoint on Public
Goods available on my website or on the Moodle.
1. Deriving the demand curve for public goods.
Here are the demand curves for three individuals for fireworks displays:
To keep things simple, let’s assume that Lily, Natalie, and Danny are the only people in society.
To get the public demand for the good, sum up the amount each individual is willing to pay at
each quantity. For example, for the 3rd fireworks display, Lily is willing to pay $2, Natalie is
willing to pay $3, and Danny is willing to pay $6. The total is $11, so the demand for the 3 rd
fireworks display is $11.
a. Complete this demand schedule:
Public Demand for Fireworks Displays
Quantity
1
2
3
4
Price (MB)
$11
b. Now graph public demand for fireworks displays below:
c. Now suppose that Danny is the one who decides to puts on a fireworks displays every
summer. Here is the marginal cost data for fireworks displays:
Quantity
1
2
3
4
Marginal Cost
$4.00
$7.50
$11.00
$14.50
To your graph of public demand, add this marginal cost data and Danny’s private demand curve.
d. Identify the quantity of fireworks displays that Danny would purchase.
e. What is the social efficient quantity of fireworks displays?
f. Shade the area of deadweight loss, based on Danny’s decision.
g. Why are fireworks displays considered public goods?
2. Suppose Aubrey is a wealthy benefactor and is considering purchasing land for a public park.
Other residents of the area will benefit if a public park is built. Consider Figure 1 below to be
Aubrey’s demand curve and Figure 2 to be the demand curve for all other residents (besides
Aubrey) for the number of acres to be included in the park. Use the information for Aubrey and
all other residents’ demand curves (for acres of land in the park) to respond to the following.
a. Using the information in Figure 1 and Figure 2, draw a correctly labeled graph that shows the
total public demand for land in the park in the grid below.
b. Assume that marginal cost is constant at $20 per acre and add it to the graph.
c. Add Aubrey’s demand curve to the graph.
d. Shade the area of deadweight loss if only Aubrey provides the land for the park.