Kyoko and Rina 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 weekend getaway. Since a public park is a public good, both Kyoko and Rina 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 Kyoko and Rina choose to contribute, then a total of $600 would be contributed to the public park. So, Kyoko and Rina 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 weekend getaway is a private good, if Kyoko chooses to spend $300 on a weekend getaway, Kyoko would get $300 of benefit from the weekend getaway and Rina wouldn't receive any benefit from Kyoko's choice. If Kyoko still spends $300 on a weekend getaway and Rina chooses to contribute $300 to the public park, Kyoko would still receive the $270 of benefit from Rina's generosity. In other words, if Kyoko decides to keep the $300 for a weekend getaway and Rina decides to contribute the $300 to the public project, then Kyoko would receive a total benefit of $300 + $270 = $570, Rina would receive a total benefit of $270, and their combined benefit would be $840. This is shown in the lower left cell of the first table. Complete the following table, which shows the combined benefits of Kyoko and Rina as previously described. Kyoko Contributes Doesn't contribute Rina Contributes Doesn't contribute $1,080 $840 $ Of the four cells of the table, which gives the greatest combined benefits to Kyoko and Rina? O When neither Kyoko nor Rina contributes to the public park O When Kyoko contributes to the public park and Rina doesn't, or vice versa
Kyoko and Rina 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 weekend getaway. Since a public park is a public good, both Kyoko and Rina 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 Kyoko and Rina choose to contribute, then a total of $600 would be contributed to the public park. So, Kyoko and Rina 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 weekend getaway is a private good, if Kyoko chooses to spend $300 on a weekend getaway, Kyoko would get $300 of benefit from the weekend getaway and Rina wouldn't receive any benefit from Kyoko's choice. If Kyoko still spends $300 on a weekend getaway and Rina chooses to contribute $300 to the public park, Kyoko would still receive the $270 of benefit from Rina's generosity. In other words, if Kyoko decides to keep the $300 for a weekend getaway and Rina decides to contribute the $300 to the public project, then Kyoko would receive a total benefit of $300 + $270 = $570, Rina would receive a total benefit of $270, and their combined benefit would be $840. This is shown in the lower left cell of the first table. Complete the following table, which shows the combined benefits of Kyoko and Rina as previously described. Kyoko Contributes Doesn't contribute Rina Contributes Doesn't contribute $1,080 $840 $ Of the four cells of the table, which gives the greatest combined benefits to Kyoko and Rina? O When neither Kyoko nor Rina contributes to the public park O When Kyoko contributes to the public park and Rina doesn't, or vice versa
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:3. Voluntary contributions toward a public good
Kyoko and Rina 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 weekend getaway.
Since a public park is a public good, both Kyoko and Rina 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 Kyoko and Rina choose to contribute, then a total of $600
would be contributed to the public park. So, Kyoko and Rina 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 weekend getaway is a private good, if Kyoko chooses to spend $300 on a weekend getaway, Kyoko would get $300 of benefit from the
weekend getaway and Rina wouldn't receive any benefit from Kyoko's choice. If Kyoko still spends $300 on a weekend getaway and Rina chooses to
contribute $300 to the public park, Kyoko would still receive the $270 of benefit from Rina's generosity. In other words, if Kyoko decides to keep the
$300 for a weekend getaway and Rina decides to contribute the $300 to the public project, then Kyoko would receive a total benefit of
$300 + $270 $570, Rina would receive a total benefit of $270, and their combined benefit would be $840. This is shown in the lower left cell of the
first table.
Complete the following table, which shows the combined benefits of Kyoko and Rina as previously described.
Kyoko
Contributes
Doesn't contribute
Rina
Contributes Doesn't contribute
$1,080
$840
Of the four cells of the table, which gives the greatest combined benefits to Kyoko and Rina?
O When neither Kyoko nor Rina contributes to the public park
O When Kyoko contributes to the public park and Rina doesn't, or vice versa
O When both Kyoko and Rina contribute to the public park
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