Question
Anna, Bob, Clara and Dave work in the same office and are considering purchasing a coffee makerfor all to use at the office. The coffee
Anna, Bob, Clara and Dave work in the same office and are considering purchasing a coffee makerfor all to use at the office. The coffee maker costs $100 but not all of them like coffee equally.Anna drinks the most coffee and has a willingness to pay of $50. Bob and Clara like coffee but notas much as Clara, so their willingness to pay is $30 each. Dave drinks coffee only when he feelssleepy and is willing to pay only $10.
a.(5 points)Explain what kind of good would the coffee maker be if it is purchased and kept in the sharedoffice space allowing everyone access to it.
b.(10 points)Is it socially optimal for the coffee maker to be purchased? Explain why or why not.
c.(5 points)Anna suggests that the four of them should split the cost of the coffee maker equally. Will thisarrangement lead to the coffee maker being purchased or not? Explain.
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