Answered: Five roommates arc planning to spend…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Five roommates arc planning to spend the weekend
in their dorm room watching movies, and they arc
debating how many movies to watch. Here is their
willingness to pay:
Quentin Spike Ridley Martin Steven
First film $14 $10 $8 $4 $2
Second film 12 8 4 2 0
Third film 10 6 2 0 0
Fourth film 6 2 0 0 0
Filth film 2 0 0 0 0
Buying a DVD costs SIS, which the roommates split
equally, so each pays $3 per movie.
a. What is the efficient number of movies to watch
(that is, the number that maximizes total surplus)?
b. from the standpoint of each roommate, what is
the preferred number of movies?
c. What is the preference of the median roommate?
d. (f the roommates held a vote on the efficient out~
come versus the median voter's preference, how
would each person vote? Which outcome would
g~ a majority?
c. lf one of the roommates proposed a different
number of movies, could his proposal beat the
winner from part (d) in a vote?
f. Can majority rule be counted on to reach efficient
outcomes in the provision of public go<Xis?

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