#10 NEWS PUBLIC GOODS Israel\'s \"Iron Dome\" Works! isra missiles and mortars f

Question

#10 NEWS PUBLIC GOODS Israel's "Iron Dome" Works! isra missiles and mortars fired across the border by Hamas and other Palestinian factions. It works. Israel's Defense Minister claims the Iron Dome has been 90 percent effective in shielding Iron Dome is an air defense system intercept and destroy i population centers in the latest barrage of artillery fired into Israel by Hamas. Suppose the annual cost of the Iron Dome is $50 million. What is the opportunity cost of this defense spending in terms of private housing, assuming a new home can be constructed for a. $100,000 b. $150,000

Explanation / Answer

A) If cost of a house is $100,000

Then the opportunity cost of defense spending of $50,000,000 to buy a drone is: $50,000,000 / $100,000 = 500 homes

B) If cost of a house is $150,000

Then the opportunity cost of defense spending of $50,000,000 is: $50,000,000 / $150,000 = 333.33 homes

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