The small town of Happy Valley has seen a large influx of families with young children in the wake of the COVID-19 pandemic. These new families are considering pooling their resources to create a new public playground. There are three proposals for the playground: (1) Tier 1, a swing set; (2) Tier 2, a swing set plus a climber; and (3) Tier 3, a swing set and climber plus multiple slides. The total costs for building each version are listed below. Assume the playground would cost nothing to maintain. It turns out that the area where the playground will be located is on the border of Joyville, a neighboring town. Joyville has also seen a recent influx of families with young children, and there is no existing playground in Joyville. The table below shows the total benefits that would accrue to Happy Valley and Joyville families from the different tiers of the playground. Total Costs: Total Benefits: Happy Valley Families Joyville Families No playground $O $0 $0 Tier 1 (swings) $5,000 $6,000 $1,000 Tier 2 (plus climber) $12,000 $15,000 $3,000 Tier 3 (plus slides) $20,000 $22,000 $6,000 A. Which playground tier would be socially efficient to build? a. No playground 1/2 b. Tier 1 (swings) c. Tier 2 (+ climber) d. Tier 3 (+ slides) Explain your reasoning for part A (above) and provide numerical support for your answer:
The small town of Happy Valley has seen a large influx of families with young children in the wake of the COVID-19 pandemic. These new families are considering pooling their resources to create a new public playground. There are three proposals for the playground: (1) Tier 1, a swing set; (2) Tier 2, a swing set plus a climber; and (3) Tier 3, a swing set and climber plus multiple slides. The total costs for building each version are listed below. Assume the playground would cost nothing to maintain. It turns out that the area where the playground will be located is on the border of Joyville, a neighboring town. Joyville has also seen a recent influx of families with young children, and there is no existing playground in Joyville. The table below shows the total benefits that would accrue to Happy Valley and Joyville families from the different tiers of the playground. Total Costs: Total Benefits: Happy Valley Families Joyville Families No playground $O $0 $0 Tier 1 (swings) $5,000 $6,000 $1,000 Tier 2 (plus climber) $12,000 $15,000 $3,000 Tier 3 (plus slides) $20,000 $22,000 $6,000 A. Which playground tier would be socially efficient to build? a. No playground 1/2 b. Tier 1 (swings) c. Tier 2 (+ climber) d. Tier 3 (+ slides) Explain your reasoning for part A (above) and provide numerical support for your answer:
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The small town of Happy Valley has seen a large influx of families with young
children in the wake of the COVID-19 pandemic. These new families are
considering pooling their resources to create a new public playground. There
are three proposals for the playground: (1) Tier 1, a swing set; (2) Tier 2, a
swing set plus a climber; and (3) Tier 3, a swing set and climber plus multiple
slides. The total costs for building each version are listed below. Assume the
playground would cost nothing to maintain.
It turns out that the area where the playground will be located is on the
border of Joyville, a neighboring town. Joyville has also seen a recent influx of
families with young children, and there is no existing playground in Joyville.
The table below shows the total benefits that would accrue to Happy Valley
and Joyville families from the different tiers of the playground.
Total Costs:
Total Benefits:
Happy Valley Families
Joyville Families
No playground
$0
$0
$0
Tier 1 (swings)
$5,000
$6,000
$1,000
Tier 2 (plus climber) $12,000
$15,000
$3,000
Tier 3 (plus slides)
$20,000
$22,000
$6,000
A. Which playground tier would be socially efficient to build?
a. No playground
1/3
b. Tier 1 (swings)
c. Tier 2 (+ climber)
d. Tier 3 (+ slides)
Explain your reasoning for part A (above) and provide numerical support for
your answer:
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