3. Voluntary contributions toward a public good Eileen and Kate are considering contributing toward the creation of a botanical garden. Each can choose whether to contribute $400 to the botanical garden or to keep that $400 for a pool table. Since a botanical garden is a public good, both Eileen and Kate will benefit from any contributions made by the other person. Specifically, every dollar that either one of them contributes will bring each of them $0.80 of benefit. For example, if both Eileen and Kate choose to contribute, then a total of $800 would be contributed to the botanical garden. So, Eileen and Kate would each receive $640 of benefit from the botanical garden, and their combined benefit would be $1,280. This is shown in the upper left cell of the first table. Since a pool table is a private good, if Eileen chooses to spend $400 on a pool table, Eileen would get $400 of benefit from the pool table and Kate wouldn't receive any benefit from Eileen's choice. If Eileen still spends $400 on a pool table and Kate chooses to contribute $400 to the botanical garden, Eileen would still receive the $320 of benefit from Kate's generosity. In other words, if Eileen decides to keep the $400 for a pool table and Kate decides to contribute the $400 to the public project, then Eileen would receive a total benefit of $400+$320 = $720, Kate would receive a total benefit of $320, and their combined benefit would be $1,040. This is shown in the lower left cell of the first table. Complete the following table, which shows the combined benefits of Eileen and Kate as previously described. Eileen Contributes Doesn't contribute Kate Contributes Doesn't contribute $1,280 S $1,040 of the four cells of the table, which gives the greatest combined benefits to Eileen and Kate? When neither Eileen nor Kate contributes to the botanical garden When both Eileen and Kate contribute to the botanical garden When Eileen contributes to the botanical garden and Kate doesn't, or vice versa

3. Voluntary contributions toward a public good Eileen and Kate are considering contributing toward the creation of a botanical garden. Each can choose whether to contribute $400 to the botanical garden or to keep that $400 for a pool table. Since a botanical garden is a public good, both Eileen and Kate will benefit from any contributions made by the other person. Specifically, every dollar that either one of them contributes will bring each of them $0.80 of benefit. For example, if both Eileen and Kate choose to contribute, then a total of $800 would be contributed to the botanical garden. So, Eileen and Kate would each receive $640 of benefit from the botanical garden, and their combined benefit would be $1,280. This is shown in the upper left cell of the first table. Since a pool table is a private good, if Eileen chooses to spend $400 on a pool table, Eileen would get $400 of benefit from the pool table and Kate wouldn't receive any benefit from Eileen's choice. If Eileen still spends $400 on a pool table and Kate chooses to contribute $400 to the botanical garden, Eileen would still receive the $320 of benefit from Kate's generosity. In other words, if Eileen decides to keep the $400 for a pool table and Kate decides to contribute the $400 to the public project, then Eileen would receive a total benefit of $400+$320 = $720, Kate would receive a total benefit of $320, and their combined benefit would be $1,040. This is shown in the lower left cell of the first table. Complete the following table, which shows the combined benefits of Eileen and Kate as previously described. Eileen Contributes Doesn't contribute Kate Contributes Doesn't contribute $1,280 S $1,040 of the four cells of the table, which gives the greatest combined benefits to Eileen and Kate? When neither Eileen nor Kate contributes to the botanical garden When both Eileen and Kate contribute to the botanical garden When Eileen contributes to the botanical garden and Kate doesn't, or vice versa

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Frontiers Of Microeconomics

Section: Chapter Questions

Problem 6PA

See similar textbooks