3. Voluntary contributions toward a public goodSean and Bob are considering contributing toward the creation of a water fountain. Each can choose whether to contribute $300 to the water fountain or to keep that $300 for a weekend getaway.Since a water fountain is a public good, both Sean and Bob will benefit from any contributions made by the other person. Specifically, every dollar that either one of them contributes will bring each of them $0.90 of benefit. For example, if both Sean and Bob choose to contribute, then a total of $600 would be contributed to the water fountain. So, Sean and Bob would each receive $540 of benefit from the water fountain, and their combined benefit would be $1,080. This is shown in the upper left cell of the first table.Since a weekend getaway is a private good, if Sean chooses to spend $300 on a weekend getaway, Sean would get $300 of benefit from the weekend getaway and Bob wouldn't receive any benefit from Sean's choice. If Sean still spends $300 on a weekend getaway and Bob chooses to contribute $300 to the water fountain, Sean would still receive the $270 of benefit from Bob's generosity. In other words, if Sean decides to keep the $300 for a weekend getaway and Bob decides to contribute the $300 to the public project, then Sean would receive a total benefit of $300+$270=$570$300+$270=$570, Bob would receive a total benefit of $270, and their combined benefit would be $840. This is shown in the lower left cell of the first table. Complete the following table, which shows the combined benefits of Sean and Bob as previously described. 3. Voluntary contributions toward a public goodSean and Bob are considering contributing toward the creation of a water fountain. Each can choose whether to contribute $300 to the water fountainor to keep that $300 for a weekend getaway.Since a water fountain is a public good, both Sean and Bob will benefit from any contributions made by the other person. Specifically, every dollar thateither one of them contributes will bring each of them $0.90 of benefit. For example, if both Sean and Bob choose to contribute, then a total of $600would be contributed to the water fountain. So, Sean and Bob would each receive $540 of benefit from the water fountain, and their combined benefitwould be $1,080. This is shown in the upper left cell of the first table.Since a weekend getaway is a private good, if Sean chooses to spend $300 on a weekend getaway, Sean would get $300 of benefit from the weekendgetaway and Bob wouldn't receive any benefit from Sean's choice. If Sean still spends $300 on a weekend getaway and Bob chooses to contribute$300 to the water fountain, Sean would still receive the $270 of benefit from Bob's generosity. In other words, if Sean decides to keep the $300 for aweekend getaway and Bob decides to contribute the $300 to the public project, then Sean would receive a total benefit of $300 + $270 = $570, Bobwould receive a total benefit of $270, and their combined benefit would be $840. This is shown in the lower left cell of the first table.Complete the following table, which shows the combined benefits of Sean and Bob as previously described.BobContributes Doesn't contributeContributes$1,080%24SeanDoesn't contribute$840%24Of the four cells of the table, which gives the greatest combined benefits to Sean and Bob?When both Sean and Bob contribute to the water fountainO When neither Sean nor Bob contributes to the water fountainWhen Sean contributes to the water fountain and Bob doesn't, or vice versaNow, consider the incentive facing Sean individually. The following table looks similar to the previous one, but this time, it is partially completed withthe individual benefit data for Sean. As shown previously, if both Sean and Bob contribute to a public good, Sean receives a benefit of $540. On theother hand, if Bob contributes to the water fountain and Sean does not, Sean receives a benefit of $570.Complete the right-hand column of the following table, which shows the individual benefits of Sean.Hint: You are not required to consider the benefit of Bob. Complete the right-hand column of the following table, which shows the individual benefits of Sean.Hint: You are not required to consider the benefit of Bob.BobContributeDoesn't contributeContribute$540, --SeanDoesn't contribute $570, --2$If Bob decides to contribute to the water fountain, Sean would maximize his benefit by choosingto the water fountain. On theother hand, if Bob decides not to contribute to the water fountain, Sean would maximize his benefit by choosingto the waterfountain.These results illustrate

Question

3. Voluntary contributions toward a public goodSean and Bob are considering contributing toward the creation of a water fountain. Each can choose whether to contribute $300 to the water fountain or to keep that $300 for a weekend getaway.Since a water fountain is a public good, both Sean and Bob will benefit from any contributions made by the other person. Specifically, every dollar that either one of them contributes will bring each of them $0.90 of benefit. For example, if both Sean and Bob choose to contribute, then a total of $600 would be contributed to the water fountain. So, Sean and Bob would each receive $540 of benefit from the water fountain, and their combined benefit would be $1,080. This is shown in the upper left cell of the first table.Since a weekend getaway is a private good, if Sean chooses to spend $300 on a weekend getaway, Sean would get $300 of benefit from the weekend getaway and Bob wouldn't receive any benefit from Sean's choice. If Sean still spends $300 on a weekend getaway and Bob chooses to contribute $300 to the water fountain, Sean would still receive the $270 of benefit from Bob's generosity. In other words, if Sean decides to keep the $300 for a weekend getaway and Bob decides to contribute the $300 to the public project, then Sean would receive a total benefit of $300+$270=$570$300+$270=$570, Bob would receive a total benefit of $270, and their combined benefit would be $840. This is shown in the lower left cell of the first table. Complete the following table, which shows the combined benefits of Sean and Bob as previously described. 3. Voluntary contributions toward a public goodSean and Bob are considering contributing toward the creation of a water fountain. Each can choose whether to contribute $300 to the water fountainor to keep that $300 for a weekend getaway.Since a water fountain is a public good, both Sean and Bob will benefit from any contributions made by the other person. Specifically, every dollar thateither one of them contributes will bring each of them $0.90 of benefit. For example, if both Sean and Bob choose to contribute, then a total of $600would be contributed to the water fountain. So, Sean and Bob would each receive $540 of benefit from the water fountain, and their combined benefitwould be $1,080. This is shown in the upper left cell of the first table.Since a weekend getaway is a private good, if Sean chooses to spend $300 on a weekend getaway, Sean would get $300 of benefit from the weekendgetaway and Bob wouldn't receive any benefit from Sean's choice. If Sean still spends $300 on a weekend getaway and Bob chooses to contribute$300 to the water fountain, Sean would still receive the $270 of benefit from Bob's generosity. In other words, if Sean decides to keep the $300 for aweekend getaway and Bob decides to contribute the $300 to the public project, then Sean would receive a total benefit of $300 + $270 = $570, Bobwould receive a total benefit of $270, and their combined benefit would be $840. This is shown in the lower left cell of the first table.Complete the following table, which shows the combined benefits of Sean and Bob as previously described.BobContributes Doesn't contributeContributes$1,080%24SeanDoesn't contribute$840%24Of the four cells of the table, which gives the greatest combined benefits to Sean and Bob?When both Sean and Bob contribute to the water fountainO When neither Sean nor Bob contributes to the water fountainWhen Sean contributes to the water fountain and Bob doesn't, or vice versaNow, consider the incentive facing Sean individually. The following table looks similar to the previous one, but this time, it is partially completed withthe individual benefit data for Sean. As shown previously, if both Sean and Bob contribute to a public good, Sean receives a benefit of $540. On theother hand, if Bob contributes to the water fountain and Sean does not, Sean receives a benefit of $570.Complete the right-hand column of the following table, which shows the individual benefits of Sean.Hint: You are not required to consider the benefit of Bob. Complete the right-hand column of the following table, which shows the individual benefits of Sean.Hint: You are not required to consider the benefit of Bob.BobContributeDoesn't contributeContribute$540, --SeanDoesn't contribute $570, --2$If Bob decides to contribute to the water fountain, Sean would maximize his benefit by choosingto the water fountain. On theother hand, if Bob decides not to contribute to the water fountain, Sean would maximize his benefit by choosingto the waterfountain.These results illustrate

Accepted Answer

If consumption of a commodity by one individual does not reduce the amount available for other, then…