Asked by Ashley Minaya on May 02, 2024
Verified
Refer to Table 11-2. Suppose the cost to clean the lake is $32 per hour and that the residents have agreed to split the cost of cleaning the lake equally. It would maximize Lydia's surplus if 6 hours of cleaning is done.
Willingness to Pay
The maximum amount an individual is prepared to spend on a good or service, reflecting the value they derive from it.
Surplus
An excess of production or supply over demand, often leading to lower prices.
- Assess the efficiency of various approaches in controlling the use of shared resources and safeguarding collective goods.
Verified Answer
PG
Peyton GrahamMay 08, 2024
Final Answer :
False
Explanation :
Lydia's willingness to pay decreases with each additional hour, and by the 6th hour, her willingness to pay is only $5, which is less than her share of the cost if the cost is split equally among four residents ($32 per hour total cost means $8 per resident). Therefore, Lydia's surplus would not be maximized by cleaning for 6 hours.
Learning Objectives
- Assess the efficiency of various approaches in controlling the use of shared resources and safeguarding collective goods.
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