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101_HW-5 - Economics 11 Winter 2011 HW#5 Due Thursday March...

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Economics 11, Winter 2011: HW #5 Due Thursday March 10 at beginning of class 1. Nancy lives in a gated community of 100 homes (99 + Nancy) that is separated from Stone Canyon Reservoir by 1,000 feet of fencing. The fencing is old, and coyotes are wandering in to the community; this is not good. The community association wants to repair the fence to prevent coyotes from coming in. The cost of repairing the fence is $10/foot. All the residents are just like Nancy: if F feet of fence are repaired and a given resident pays c toward the repair, then that resident derives utility 1 , 000 - (1 , 000 - F ) 1 / 2 - c . (Notice that the benefit comes from the total amount of fence repaired, that benefit is increasing in amount of fence repaired, and that repairing the last foot of fencing is more important than repairing the first foot.) (a) Suppose the community association can decide to repair some or all of the fence and divide the cost equally among all 100 homes.
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