Kenji and Paolo are considering contributing toward the creation of a building mural. Each can choose whether to contribute $300 to the building mural or to keep that $300 for a new suit.Since a building mural is a public good, both Kenji and Paolo will benefit from any contributions made by the other person. Specifically, every dollar that either one of them contributes will bring each of them $0.70 of benefit. For example, if both Kenji and Paolo choose to contribute, then a total of $600 would be contributed to the building mural. So, Kenji and Paolo would each receive $420 of benefit from the building mural, and their combined benefit would be $840. This is shown in the upper left cell of the first table.Since a new suit is a private good, if Kenji chooses to spend $300 on a new suit, Kenji would get $300 of benefit from the new suit and Paolo wouldn't receive any benefit from Kenji's choice. If Kenji still spends $300 on a new suit and Paolo chooses to contribute $300 to the building mural, Kenji would still receive the $210 of benefit from Paolo's generosity. In other words, if Kenji decides to keep the $300 for a new suit and Paolo decides to contribute the $300 to the public project, then Kenji would receive a total benefit of $300+$210=$510$300+$210=$510, Paolo would receive a total benefit of $210, and their combined benefit would be $720. This is shown in the lower left cell of the first table. Complete the following table, which shows the combined benefits of Kenji and Paolo as previously described.PaoloContributes Doesn't contributeContributes$8402$KenjiDoesn't contribute$720Of the four cells of the table, which gives the greatest combined benefits to Kenji and Paolo?When both Kenji and Paolo contribute to the building muralWhen Kenji contributes to the building mural and Paolo doesn't, or vice versaWhen neither Kenji nor Paolo contributes to the building muralNow, consider the incentive facing Kenji individually. The following table looks similar to the previous one, but this time, it is partially completed withthe individual benefit data for Kenji. As shown previously, if both Kenji and Paolo contribute to a public good, Kenji receives a benefit of $420. Onthe other hand, if Paolo contributes to the building mural and Kenji does not, Kenji receives a benefit of $510. Complete the right-hand column of the following table, which shows the individual benefits of Kenji.Hint: You are not required to consider the benefit of Paolo.PaoloContributeDoesn't contributeContribute$420, --2$KenjiDoesn't contribute$510, --$If Paolo decides to contribute to the building muraKenji would maximize his benefit by choosingto the building mural. Onthe other hand, if Paolo decides not to contribute to the building mural, Kenji would maximize his benefit by choosingto thebuilding mural.These results illustrate

The correct answer is given in the second step.

Answered: Complete the right-hand column of the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Kenji and Paolo are considering contributing toward the creation of a building mural. Each can choose whether to contribute $300 to the building mural or to keep that $300 for a new suit.

Since a building mural is a public good, both Kenji and Paolo will benefit from any contributions made by the other person. Specifically, every dollar that either one of them contributes will bring each of them $0.70 of benefit. For example, if both Kenji and Paolo choose to contribute, then a total of $600 would be contributed to the building mural. So, Kenji and Paolo would each receive $420 of benefit from the building mural, and their combined benefit would be $840. This is shown in the upper left cell of the first table.

Since a new suit is a private good, if Kenji chooses to spend $300 on a new suit, Kenji would get $300 of benefit from the new suit and Paolo wouldn't receive any benefit from Kenji's choice. If Kenji still spends $300 on a new suit and Paolo chooses to contribute $300 to the building mural, Kenji would still receive the $210 of benefit from Paolo's generosity. In other words, if Kenji decides to keep the $300 for a new suit and Paolo decides to contribute the $300 to the public project, then Kenji would receive a total benefit of $300+$210=$510$300+$210=$510, Paolo would receive a total benefit of $210, and their combined benefit would be $720. This is shown in the lower left cell of the first table.

Complete the following table, which shows the combined benefits of Kenji and Paolo as previously described.
Paolo
Contributes Doesn't contribute
Contributes
$840
2$
Kenji
Doesn't contribute
$720
Of the four cells of the table, which gives the greatest combined benefits to Kenji and Paolo?
When both Kenji and Paolo contribute to the building mural
When Kenji contributes to the building mural and Paolo doesn't, or vice versa
When neither Kenji nor Paolo contributes to the building mural
Now, consider the incentive facing Kenji individually. The following table looks similar to the previous one, but this time, it is partially completed with
the individual benefit data for Kenji. As shown previously, if both Kenji and Paolo contribute to a public good, Kenji receives a benefit of $420. On
the other hand, if Paolo contributes to the building mural and Kenji does not, Kenji receives a benefit of $510.

Complete the right-hand column of the following table, which shows the individual benefits of Kenji.
Hint: You are not required to consider the benefit of Paolo.
Paolo
Contribute
Doesn't contribute
Contribute
$420, --
2$
Kenji
Doesn't contribute
$510, --
$
If Paolo decides to contribute to the building mura
Kenji would maximize his benefit by choosing
to the building mural. On
the other hand, if Paolo decides not to contribute to the building mural, Kenji would maximize his benefit by choosing
to the
building mural.
These results illustrate

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