Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: TUTORIAL 11 WEEK 12 COMMON RESOURCES AND PROPERTY RIGHTS PUBLIC GOODS AND THEIR FINANCING Reading Text: Ch 12 (pp334 to end of chapter) Ch 13 Ch 12 Review Questions: 7 7 Spending on Christmas presents can become a positional arms race and result in wasteful spending patterns. Families sometimes devise rules and adopt norms which prevent such races occurring. Agreeing to limit spending is one such rule. Problems: 8 8 The following table shows the total village income from grazing llamas, together with the marginal village income from the activity. Number of llamas on the commons Price per 2- year-old llama ($) Income per llama ($/year) Total village income ($/year) Marginal income ($/year) 22 1 122 22 22 14 2 118 18 36 12 3 116 16 48 8 4 114 14 56 4 5 112 12 60 –6 6 109 9 54 a Three llamas will be sent onto the commons. The resulting net village income will be $48 from the llamas plus $45 from government bonds, or $93. b The socially optimal number is only one llama. Villagers send three instead, because in deciding whether or not to send a llama, each villager ignores the impact of his or her llama’s presence on the other llamas’ fleece quality. The total village income at the socially optimal number of one llama is $22 from the llama and $75 from government bonds, or $97. c If a single villager could control access to the commons, she would send only a single llama, which she could sell after one year for $22 more than she paid for it. If the land were free, the owner would thus earn $22 per year by raising one llama per year on it, or $7 more than she would have earned had she used her $100 to buy a bond. The price of the land will be bid up until owning the land is no better buy a bond....
View Full Document

This note was uploaded on 03/19/2012 for the course ECON 1101 taught by Professor Julia during the Three '08 term at University of New South Wales.

Page1 / 5


This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online