Dmitri and Jake are considering contributing toward the creation of a water fountain. Each can choose whether to contribute $300 to the water fountain or to keep that $300 for a pool table.Since a water fountain is a public good, both Dmitri and Jake 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 Dmitri and Jake choose to contribute, then a total of $600 would be contributed to the water fountain. So, Dmitri and Jake would each receive $420 of benefit from the water fountain, and their combined benefit would be $840. This is shown in the upper left cell of the first table.Since a pool table is a private good, if Dmitri chooses to spend $300 on a pool table, Dmitri would get $300 of benefit from the pool table and Jake wouldn't receive any benefit from Dmitri's choice. If Dmitri still spends $300 on a pool table and Jake chooses to contribute $300 to the water fountain, Dmitri would still receive the $210 of benefit from Jake's generosity. In other words, if Dmitri decides to keep the $300 for a pool table and Jake decides to contribute the $300 to the public project, then Dmitri would receive a total benefit of $300+$210=$510$300+$210=$510, Jake 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 Dmitri and Jake as previouslydescribed.JakeContributes Doesn't contributeContributes$840DmitriDoesn't contribute$720Of the four cells of the table, which gives the greatest combined benefits to Dmitri and Jake?When neither Dmitri nor Jake contributes to the water fountainWhen both Dmitri and Jake contribute to the water fountainWhen Dmitri contributes to the water fountain and Jake doesn't, or vice versaNow, consider the incentive facing Dmitri individually. The following table looks similar to theprevious one, but this time, it is partially completed with the individual benefit data for Dmitri.As shown previously, if both Dmitri and Jake contribute to a public good, Dmitri receives a benefitof $420. On the other hand, if Jake contributes to the water fountain and Dmitri does not, Dmitrireceives a benefit of $510.Complete the right-hand column of the following table, which shows the individual benefits ofDmitri.Hint: You are not required to consider the benefit of Jake.JakeContributeDoesn't contributeContribute$420, -DmitriDoesn't contribute $510, -24If Jake decides to contribute to the water fountain, Dmitri would maximize his benefit by choosingto the water fountain. On the other hand, if Jake decides not to contributeto the water fountain, Dmitri would maximize his benefit by choosingto thewater fountain.These results illustrate

Compensation and benefits (C&B) is a sub-discipline of human resources responsible for…

Dmitri and Jake are considering contributing toward the creation of a water fountain. Each can choose whether to contribute $300 to the water fountain or to keep that $300 for a pool table. Since a water fountain is a public good, both Dmitri and Jake 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 Dmitri and Jake choose to contribute, then a total of $600 would be contributed to the water fountain. So, Dmitri and Jake would each receive $420 of benefit from the water fountain, and their combined benefit would be $840. This is shown in the upper left cell of the first table. Since a pool table is a private good, if Dmitri chooses to spend $300 on a pool table, Dmitri would get $300 of benefit from the pool table and Jake wouldn't receive any benefit from Dmitri's choice. If Dmitri still spends $300 on a pool table and Jake chooses to contribute $300 to the water fountain, Dmitri would still receive the $210 of benefit from Jake's generosity. In other words, if Dmitri decides to keep the $300 for a pool table and Jake decides to contribute the $300 to the public project, then Dmitri would receive a total benefit of $300+$210=$510$300+$210=$510, Jake 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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Dmitri and Jake are considering contributing toward the creation of a water fountain. Each can choose whether to contribute $300 to the water fountain or to keep that $300 for a pool table.

Since a water fountain is a public good, both Dmitri and Jake 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 Dmitri and Jake choose to contribute, then a total of $600 would be contributed to the water fountain. So, Dmitri and Jake would each receive $420 of benefit from the water fountain, and their combined benefit would be $840. This is shown in the upper left cell of the first table.

Since a pool table is a private good, if Dmitri chooses to spend $300 on a pool table, Dmitri would get $300 of benefit from the pool table and Jake wouldn't receive any benefit from Dmitri's choice. If Dmitri still spends $300 on a pool table and Jake chooses to contribute $300 to the water fountain, Dmitri would still receive the $210 of benefit from Jake's generosity. In other words, if Dmitri decides to keep the $300 for a pool table and Jake decides to contribute the $300 to the public project, then Dmitri would receive a total benefit of $300+$210=$510$300+$210=$510, Jake 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 Dmitri and Jake as previously
described.
Jake
Contributes Doesn't contribute
Contributes
$840
Dmitri
Doesn't contribute
$720
Of the four cells of the table, which gives the greatest combined benefits to Dmitri and Jake?
When neither Dmitri nor Jake contributes to the water fountain
When both Dmitri and Jake contribute to the water fountain
When Dmitri contributes to the water fountain and Jake doesn't, or vice versa
Now, consider the incentive facing Dmitri individually. The following table looks similar to the
previous one, but this time, it is partially completed with the individual benefit data for Dmitri.
As shown previously, if both Dmitri and Jake contribute to a public good, Dmitri receives a benefit
of $420. On the other hand, if Jake contributes to the water fountain and Dmitri does not, Dmitri
receives a benefit of $510.
Complete the right-hand column of the following table, which shows the individual benefits of
Dmitri.
Hint: You are not required to consider the benefit of Jake.
Jake
Contribute
Doesn't contribute
Contribute
$420, -
Dmitri
Doesn't contribute $510, -
24
If Jake decides to contribute to the water fountain, Dmitri would maximize his benefit by choosing
to the water fountain. On the other hand, if Jake decides not to contribute
to the water fountain, Dmitri would maximize his benefit by choosing
to the
water fountain.
These results illustrate

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