ssume that radio broadcasts are nonrival and nonexcludable. Two people, Artie and Bill, listen to the same radio station during their commute. Each person values the radio station at $3$3 per day. Both Artie and Bill loathe listening to advertisements. Listening to advertisements makes Artie and Bill each worse off by $1.50$1.50 per day. The radio station needs $2$2 per day to continue operating, which it currently earns from advertisers ($2$2 per day is exactly what the airtime is worth to the advertisers). The radio station is considering asking for donations from Artie and Bill and getting rid of the advertising. Artie and Bill can choose to donate to prevent advertisements or not. If only one chooses to donate, he must donate the whole $2$2 to get rid of the ads. If both choose to donate, each pays $1.$1. Assume that both Artie and Bill are each trying to gain the most net benefit possible, and that they do not cooperate with each other. What is the socially efficient way to solve the public good problem in this example? Funding the radio station with donations. Neither advertising nor donations can fund the radio station since its cost exceeds its marginal social benefit. Funding the radio station with advertising. Funding the radio station with either advertising or donations, they are equally efficient. What is the likely outcome for the radio station? Only Bill donates, and there will be no advertisements. Both Artie and Bill donate, and there will be no advertisements. Neither Artie nor Bill donates, and there will be advertisements, Only Artie donates, and there will be no advertisements. Is the socially efficient outcome the one that occurs? Why, or why not? No, the incentive to free ride prevents the socially efficient outcome from occurring. Yes, since only one type of funding can keep the radio station in business, that method must be socially efficient. No, the socially efficient outcome is not obtainable because neither Artie nor Bill are behaving rationally. Yes, both outcomes solve the public goods problem, and so both are socially efficient. Thus, regardless of which outcome occurs, the socially efficient outcome occurs.

ssume that radio broadcasts are nonrival and nonexcludable. Two people, Artie and Bill, listen to the same radio station during their commute. Each person values the radio station at $3$3 per day. Both Artie and Bill loathe listening to advertisements. Listening to advertisements makes Artie and Bill each worse off by $1.50$1.50 per day. The radio station needs $2$2 per day to continue operating, which it currently earns from advertisers ($2$2 per day is exactly what the airtime is worth to the advertisers). The radio station is considering asking for donations from Artie and Bill and getting rid of the advertising. Artie and Bill can choose to donate to prevent advertisements or not. If only one chooses to donate, he must donate the whole $2$2 to get rid of the ads. If both choose to donate, each pays $1.$1. Assume that both Artie and Bill are each trying to gain the most net benefit possible, and that they do not cooperate with each other. What is the socially efficient way to solve the public good problem in this example? Funding the radio station with donations. Neither advertising nor donations can fund the radio station since its cost exceeds its marginal social benefit. Funding the radio station with advertising. Funding the radio station with either advertising or donations, they are equally efficient. What is the likely outcome for the radio station? Only Bill donates, and there will be no advertisements. Both Artie and Bill donate, and there will be no advertisements. Neither Artie nor Bill donates, and there will be advertisements, Only Artie donates, and there will be no advertisements. Is the socially efficient outcome the one that occurs? Why, or why not? No, the incentive to free ride prevents the socially efficient outcome from occurring. Yes, since only one type of funding can keep the radio station in business, that method must be socially efficient. No, the socially efficient outcome is not obtainable because neither Artie nor Bill are behaving rationally. Yes, both outcomes solve the public goods problem, and so both are socially efficient. Thus, regardless of which outcome occurs, the socially efficient outcome occurs.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter14: Environmental Economics

Section: Chapter Questions

Problem 4SQ

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Assume that radio broadcasts are nonrival and nonexcludable. Two people, Artie and Bill, listen to the same radio station during their commute. Each person values the radio station at $3$3 per day. Both Artie and Bill loathe listening to advertisements. Listening to advertisements makes Artie and Bill each worse off by $1.50$1.50 per day. The radio station needs $2$2 per day to continue operating, which it currently earns from advertisers ($2$2 per day is exactly what the airtime is worth to the advertisers). The radio station is considering asking for donations from Artie and Bill and getting rid of the advertising. Artie and Bill can choose to donate to prevent advertisements or not. If only one chooses to donate, he must donate the whole $2$2 to get rid of the ads. If both choose to donate, each pays $1.$1. Assume that both Artie and Bill are each trying to gain the most net benefit possible, and that they do not cooperate with each other.

What is the socially efficient way to solve the public good problem in this example?

Funding the radio station with donations.

Neither advertising nor donations can fund the radio station since its cost exceeds its marginal social benefit.

Funding the radio station with advertising.

Funding the radio station with either advertising or donations, they are equally efficient.

What is the likely outcome for the radio station?

Only Bill donates, and there will be no advertisements.

Both Artie and Bill donate, and there will be no advertisements.

Neither Artie nor Bill donates, and there will be advertisements,

Only Artie donates, and there will be no advertisements.

Is the socially efficient outcome the one that occurs? Why, or why not?

No, the incentive to free ride prevents the socially efficient outcome from occurring.

Yes, since only one type of funding can keep the radio station in business, that method must be socially efficient.

No, the socially efficient outcome is not obtainable because neither Artie nor Bill are behaving rationally.

Yes, both outcomes solve the public goods problem, and so both are socially efficient. Thus, regardless of which outcome occurs, the socially efficient outcome occurs.

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