Homework (Ch 11) Back to Assignment Attempts Keep the Highest / 5 3. Voluntary contributions toward a public good Dmitri and Jake are considering contributing toward the creation of a water fountain. Each can choose whether to contribute $300 to the water ountain or to keep that $300 for a weekend getaway. since a water fountain is a public good, both Dmitri and Jake will benefit from any contributions made by the other person. Specifically, every dollar that either one of them contributes will bring each of them $0.70 of benefit. For example, if both Dmitri and Jake choose to contribute, then a total of $600 would be contributed to the water fountain. So, Dmitri and Jake would each receive $420 of benefit from the water fountain, and their combined benefit would be $840. This is shown in the upper left cell of the first table. weekend getaway is a private good, if Dmitri chooses to spend $300 on a week end getaway, Dmitri would get $300 of benefit from the nd getaway and Jake wouldn't receive any benefit from Dmitri's choice. If Dmitri still spends $300 on a weekend getaway and Jake chooses to contribute $300 to the water fountain, Dmitri would still receive the $210 of benefit from Jake's generosity. In other words, if Dmitri decides to keep the $300 for a weekend getaway and Jake decides to contribute the $300 to the public project, then Dmitri would receive a total benefit of $300 +$210 = $510, Jake would receive a total benefit of $210, and their combined benefit would be $720. This is shown in the lower left cell of the first table. Complete the following table, which shows the combined benefits of Dmitri and Jake as previously described Jake Contributes Doesn't contribute Dmitr Contributes $840 5720 Of the four cells of the table, which gives the greatest combined benefits to Dmitri and Jake? When neither Dmitri nor Jake contributes to the water fountain When Dmitri contributes to the water fountain and lake doesn't, or vice versa When both Dmitri and lake contribute to the water fountain Now, consider the incentive facing Dmitri individually. The following table looks similar to the previous one, but this time, it is partially completed with he individual benefit data for Dmitri. As shown previously, if both Dmitri and Jake contribute to a public good, Dmitri receives a benefit of $420. On the other hand, if Jake contributes to the water fountain and Dmitri does not, Dmitri receives a benefit of $510. Complete the right-hand column of the following table, which shows the individual benefits of Dmitri. Hint: You are not required to consider the benefit of Jake. Contribute Doesn't contribute Contribute Doesn't contribute $6 10. If Jake decides to contribute to the water fountain, Dmitri would maximize his benefit by choosing to the water fountain. On the other hand, if lake decides not to contribute to the water fountain, Dmitri would maximize his benefit by choosing to the water fountain, These results illustrate Grade It Now Save & Continue Continue without saving