3. Suppose we are considering fire hydrants in a small neighborhood. For simplicity, assume that only two individuals live in this neighborhood; Evan and Ashley. Once the fire hydrants are supplied by the city, they are automatically available to both Evan and Ashley. Thus, we can view the fire hydrants as public goods. The table below summarizes Evan and Ashley's individual marginal willingness to pay for fire hydrants. Number of Fire Hydrants 1 2 3 4 5 Evan's MWTP $240 200 160 120 80 Ashley's MWTP $120 80 60 40 20 Suppose that one fire hydrant is provided in the neighborhood. Evan and Ashley are both being charged a municipal tax of $100 each to pay for the hydrant. Would Evan or Ashley (or both) be considered a 'free rider'? Explain your answer.

3. Suppose we are considering fire hydrants in a small neighborhood. For simplicity, assume that only two individuals live in this neighborhood; Evan and Ashley. Once the fire hydrants are supplied by the city, they are automatically available to both Evan and Ashley. Thus, we can view the fire hydrants as public goods. The table below summarizes Evan and Ashley's individual marginal willingness to pay for fire hydrants. Number of Fire Hydrants 1 2 3 4 5 Evan's MWTP $240 200 160 120 80 Ashley's MWTP $120 80 60 40 20 Suppose that one fire hydrant is provided in the neighborhood. Evan and Ashley are both being charged a municipal tax of $100 each to pay for the hydrant. Would Evan or Ashley (or both) be considered a 'free rider'? Explain your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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