a.
To state:Whether the project would be undertaken and total net benefit as well as individual benefits and whether the total benefits are positive.
a.
Answer to Problem 16.8P
The project will be undertaken.
Benefit to A would be $50
Benefit to B would be $40
Benefit to C would be ($50)
Total benefit would be positive
Explanation of Solution
If the project cost is $300 and it is divided equally amongst three people, A, B and C, each person will pay $100. This means that the
A:
B:
C:
Since, two people gain from the project the project will be undertaken.
Net benefit from the project:
Introduction:A project is selected only when the total benefits arising from it outweighs its cost. However, a project is selected on the basis that the aggregate benefits arising from the project is more than the individual losses.
b.
To state:Whether a majority would vote for the project and total net benefits would be positive.
b.
Answer to Problem 16.8P
The project will be undertaken.
Benefit to A would be $25
Benefit to B would be $15
Benefit to C would be ($75)
Total benefit would be negative
Explanation of Solution
If the project cost is $375 and it is divided equally amongst three people, A, B and C, each person will pay $125. This means that the profit/ loss to each party would be:
A:
B:
C:
Since, two people gain from the project the project will be undertaken.
Net benefit from the project:
Introduction:A project is selected only when the total benefits arising from it outweighs its cost. However, a project is selected on the basis that the aggregate benefits arising from the project is more than the individual losses.
c.
To state:the type of results expected in part a and b when votes can be bought and sold in a free market.
c.
Answer to Problem 16.8P
The project will be undertaken.
Benefit to A would be $50
Benefit to B would be $40
Benefit to C would be ($50)
Total benefit would be positive
Explanation of Solution
If the project cost is $300 and it is divided equally amongst three people, A, B and C, each person will pay $100. This means that the profit/ loss to each party would be:
A:
B:
C:
Since, two people gain from the project the project will be undertaken.
Net benefit from the project:
Introduction:A project is selected only when the total benefits arising from it outweighs its cost. However, a project is selected on the basis that the aggregate benefits arising from the project is more than the individual losses.
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Chapter 16 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
- assume that there are 1000 residents of a town, each of whose marginal benefit (willingness to pay) for having x miles of roads is P = 100 - 5x. Roads are built competitively at a marginal cost of MC = 2000 per mile. Roads are a public good. What is the efficient level of roadway construction? It is closest to? If residents decide on road building independently, how many miles of roadway will be built? It is closest to:arrow_forwardplease answer all including ones that may have already been selected. Eric and Kenji are considering contributing toward the creation of a public park. Each can choose whether to contribute $300 to the public park or to keep that $300 for a cell phone. Since a public park is a public good, both Eric and Kenji will benefit from any contributions made by the other person. Specifically, every dollar that either one of them contributes will bring each of them $0.90 of benefit. For example, if both Eric and Kenji choose to contribute, then a total of $600 would be contributed to the public park. So, Eric and Kenji would each receive $540 of benefit from the public park, and their combined benefit would be $1,080. This is shown in the upper left cell of the first table. Since a cell phone is a private good, if Eric chooses to spend $300 on a cell phone, Eric would get $300 of benefit from the cell phone and Kenji wouldn't receive any benefit from Eric's choice. If Eric still spends $300…arrow_forwardConsider a society with three people (Atakan, Feyza and Nedim) who is trying to decide how much money to spend on schools. There are three options for spending on schools: H (High), M (Medium) or L (Low). These individuals rank the three options in the following way: Rank Atakan Feyza Nedim 1st Choice M L H 2nd Choice L H M 3rd Choice H M L Question -Would majority voting bring about a decision on how much to spend on schools? Explain why.arrow_forward
- The above table shows the benefit to each voter if an issue passes. The cost per voter of the issue passing is $100. According to Majority Rules voting, will the issue pass? According to marginal analysis, should the issue pass?arrow_forwardAssume that Matt, Joe, and Teresa are the only citizens in a community. A proposed public good has a total cost of $1,000. All three citizens will share an equal portion of this cost in taxes. The benefit of the public good is $380 for Matt, $360 for Joe, and $200 for Teresa. In a majority vote, this proposal will most likely be Multiple Choice accepted; the public good is produced, even though it is economically inefficient. defeated; the public good is not produced, which is the proper outcome. defeated; the public good is not produced, even though it would have been efficient to do so. accepted; the public good is produced, which is economically efficient.arrow_forwardThree neighboring towns – Marshland, Dampland, and Wetland – all border the same lake. The lake frequently floods causing damage to property in all three towns. Each town would benefit from flood mitigation, but the level of benefits differs. With Z representing the level of mitigation: for Marshland, MB = 3 – Z for Dampland, MB = 4 – 2Z for Wetland, MB = 11- Z The marginal cost of flood mitigation is MC = 2 + 12Z Questions: ***Please Note*** Previous Expert Calculated: Z = 16/3 as the Solution to (a) Math Solver Calculates: Z = 1 ***Please Resolve*** (a) What is the socially optimal level of Z? (b) What would each individual town be willing to pay for this level of flood mitigation? (c) The representative from Wetland proposes that each town pay an equal share for the optimal level of flood mitigation. Would…arrow_forward
- The population of Outbacktown is 1,000 people. Each of them has a marginal benefit curve for fireworks given by MB = 10 – 2Q dollars, where Q is the number of minutes of the fireworks display. The marginal cost is constant, each extra minute costs 5,000 dollars; thus MC = 5,000. Outbacktown is sparsely populated, and the terrain is very flat, so it is fairly safe to assume that fireworks over there are both nonrival and nonexcludable. (a) Obtain the optimal number of minutes that the show should last. What is the Lindahl price for each individual? (b) Now suppose that the usual provider is unavailable to offer the firework display this year and the major has to go with a new provider, Mr. Smoke. Fortunately, Mr. Smoke's marginal cost is the same as the usual provider. However, the environmental quality of Mr. Smoke's display is not that great; it generates a negative externality in the health of the population that has been estimated to be 2 dollars per each minute of the show, and for…arrow_forwardIndividuals A, B and C have the following individual demand curves: Q=7-5P Q=10-P Qc=18-3P Make a price quantity chart for each consumer. Then add a column showing the total quantity demanded for a private good. Next show the quantity price chart showing the total demand for a public good. Graph and label all 5 demand curves on the same graph (see provided graph sheet). If the marginal cost is $4 a unit how many units should be bought if the good is a private good? How many units would each individual buy? If the marginal cost is $6 a unit, to the nearest .1 how many units should be bought if the good is a public good? To the nearest S 0.01 what are the Lindahl prices each person is willing to pay? Do consumers of public goods have the same incentives to reveal their true valuations of Public goods as they do of Private goods? Why or why not?arrow_forwardBN10.3 Case: Your non-profit has just been awarded a special government environmental clean- up grant of $90,000. You are given the choice to take the $90,000 now or wait until next year. With an election coming up, the amount of next year's grant will vary based on which party wins. Assuming that money tomorrow is worth the same as money today, the grant amounts are: Outcome Democrats control everything Republicans control everything Split government Assume: Grant Amount $160,000 $36,100 $90,000 Probability 0.25 0.25 0.50 Assume your Payoff in each case (based on your utility function) is sqrt (grant amount). Question: Do you accept the Money today or wait until next year? Include Calculations of the Expected Value and Expected Utility.arrow_forward
- QUESTION 7 Neomercantilists are more skeptical than liberals that states can move to Pareto-optimal outcomes in prisoners' dilemma because o they believe that prisoners' gains and losses are not likely to be balanced and equitable. o they are very concerned about free riding by states. o they view the prisoners as rational, self-interested individuals. o they see cheating as a major problem. QUESTION 8 A Pareto-optimal outcome is the best possible outcome for a prisoner in prisoners' dilemma O True False QUESTION 9 Interventionist liberals are more concerned than orthodox liberals with international institutions O negative freedom o distributional issues o domestic-international interactionsarrow_forwardFour neighbors, each with a vegetable garden, agree to share their produce. One will grow beans (B), one will grow lettuce (L), one will grow tomatoes (T), and one will grow zucchini (Z). Table shows what fraction of each crop each neighbor will receive. What prices should the neighbors charge for their crops if each person is to break even and the lowest-priced crop has a value of $50?arrow_forwardSuppose five people have houses on the same small lane. They all individually benefit from regular maintenance of the lane. Their individual marginal benefit curves are P = 8 ― (1/10)Q, where P reflects a willingness to pay in thousands and Q is the length of the road repaired in ten-yard units. The cost of maintenance is $2,000 per ten yards. Suppose one person is currently the only one paying for maintenance. How much does this person buy, and what is the deadweight loss? Does anyone individually have an incentive to pay for additional maintenance, and why or why not?arrow_forward
