3. Voluntary contributions toward a public good Yakov and Charles are considerin

Question

3. Voluntary contributions toward a public good

Yakov and Charles are considering contributing toward the creation of a botanical garden. Each can choose whether to contribute $300 to the botanical garden or to keep that $300 for a pool table.

Since a botanical garden is a public good, both Yakov and Charles 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 Yakov and Charles choose to contribute, then a total of $600 would be contributed to the botanical garden. So, Yakov and Charles would each receive $540 of benefit from the botanical garden, and their combined benefit would be $1,080. This is shown in the upper left cell of the first table.

Options for fill in the blank:

1. contibute or not contribute

2. contribute or not contribute

3. why markets are efficient, the Tragedy of the Commons, the creation of a positive externality, or the free-rider problem

Explanation / Answer

                                                         Charles

So from above table we can see that greatest combined benefits to both would occur when both charles and Yokav decide to contribute to botanical garden.

Individal benfit table

                                                                     Charles

Yakov Contribute

fill in the blank:

1. not contribute

2. not contribute

3. the free-rider problem

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