PracticeProblems-5

PracticeProblems-5 - Economics 11, Winter 2011: Practice...

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Unformatted text preview: Economics 11, Winter 2011: Practice Problems #5 1. Nicholson-Snyder, 16.3 2. Nicholson-Snyder, 16.4 3. Nicholson-Snyder, 16.6 4. Mary lives in a gated community of 100 homes (99 + Mary) that is separated from Franklin Canyon Park by 1,000 yards 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/yard. All the residents are just like Mary: if Y yards of fence are repaired and a given resident pays c toward the repair, then that resident derives utility Y- c . (Notice that the benefit comes from the total yards repaired.) (a) Suppose the community association can decide to repair some or all of the fence and divide the cost equally among all 100 homes. What is the optimal amount of fence repair? (Remember that the maximum is 1000 yards.) (b) Suppose instead that the community association asks for voluntary contributions. If each resident acts perfectly selfishly, how muchcontributions....
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PracticeProblems-5 - Economics 11, Winter 2011: Practice...

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