E2 Question 10A village has six residents, each of whom has accumulated savings of $100. Each villager can use this money either to buy agovernment bond that pays 18 percent interest per year or to buy a year-old lama, send it onto the commons to graze, and sell it afteri year. The price the villager gets for the 2-year-old lama depends on the quality of the fleece it grows while grazing on the commons.That in turn depends on the animal's access to grazing, which depends on the number of llamas sent to the commons, as shown in thefollowing table:Price per1lamas on the 2-year-old1lama ($)Number ofcommons12511911611341116109The villagers make their investment decisions one after another, and their decisions are public.a. lf each villager decides individually how to invest, how many llamas wil be sent onto the commons, and what will be the resultingvillage income?Number of lamas:Instructions: Enter your response as a whole number.Village income: S[b. What is the socially optimal number of llamas for this village?Socially optimal number of llamas:What would village income be if the socially optimai number of llamas were sent onto the commons?Instructions: Enter your response as a whole number.Village income: S

The following formula are used to calculate the income: Income for llama can be calculated as…

A village has six residents, each of whom has accumulated savings of $100. Each villager can use this money either to buy a government bond that pays 18 percent interest per year or to buy a year-old liama, send it onto the commans to graze, and sell it after i year. The price the villager gets for the 2-year-old ilama depends on the quality of the fleece it grows while grazing on the commons. That in turn depends on the animal's access to grazing, which depends on the number of lamas sent to the commons, as shown in the following table: Price per llamas on the 2-year-old llama ($) Number of connons 125 119 116 4 113 111 109 The villagers make their investment decisions one after another, and their decisions are public. a. f each villager decides individually how to Invest, how many llamas will be sent onto the commons, and what will be the resulting village income? Number of lamas: [ Instructions: Enter your response as a whole number. Village income: S b. What is the socially optimal number of lamas for this village? Socially optimal number of llamas: What would village income be if the socially optimal number of llamas were sent onto the commons? Instructions: Enter your response as a whole number. Village income:

A village has six residents, each of whom has accumulated savings of $100. Each villager can use this money either to buy a government bond that pays 18 percent interest per year or to buy a year-old liama, send it onto the commans to graze, and sell it after i year. The price the villager gets for the 2-year-old ilama depends on the quality of the fleece it grows while grazing on the commons. That in turn depends on the animal's access to grazing, which depends on the number of lamas sent to the commons, as shown in the following table: Price per llamas on the 2-year-old llama ($) Number of connons 125 119 116 4 113 111 109 The villagers make their investment decisions one after another, and their decisions are public. a. f each villager decides individually how to Invest, how many llamas will be sent onto the commons, and what will be the resulting village income? Number of lamas: [ Instructions: Enter your response as a whole number. Village income: S b. What is the socially optimal number of lamas for this village? Socially optimal number of llamas: What would village income be if the socially optimal number of llamas were sent onto the commons? Instructions: Enter your response as a whole number. Village income:

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 5PA

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