Four roommates a rc planning to sp<,nd the weekend
in their dorm room watching old movies, and they arc
debating how many lo watch. Herc is their willingness
to pay for each film:
a. Within the donn room, is the showing of a movie
a public good? Why or why not?
b. If it costs $8 to rent a movie, how many movies should
the roommates rent to maximiz.c total surplus 7
c. H they choose the optimal number from part (b)
and then split the cost of renting the movies
equally, how much surplus does each person
obtain from watching the movies?
d. Is there any way to split the cost lo ensure tha t
everyone benefits? What practical problcms does
this solution raise?
e. Su pposc they agrcc in advance to choose the ef.
ficient number and lo split the cost of the movies
equall}'- When Steven is asked his willingness to
pa}\ will he have an incentive to tell the truth 7 If
so, why? If not, what will he be tempted to say?
f. What docs this example teach you about the optimal provision of public goods?
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