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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

The rules of politics are not always the same as the rules of economics. In discussions of setting budgets for government agencies, there is a strategy called “closing the Washington Monument.” When an agency faces the unwelcome prospect of a budget cut, it may decide to close a high-visibility attraction enjoyed by many people (like the Washington Monument). Explain in terms of diminishing marginal utility why the Washington Monument strategy is So misleading. Hint: If you are really trying to make the best of a budget cut, should you cut the items in your budget with tile highest marginal utility or line lowest marginal utility? Does the Washington Monument strategy cut the items with the highest marginal utility or line lowest marginal utility?

To determine

Explain in terms of diminishing marginal utility, why the strategy of Washington monument is misleading.

Explanation

Washington monument strategy is strategy of local government for the proposed budget to hinder the essential services for the public but this become the question for the public as government has to spend the money for the security, maintenance of the monument and would spend the money somewhere else on other important works.

law of diminishing marginal utility says if more and more units are provided, utility of additional units will get diminishes...

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