A Village Has Five Residents, Each of Whom Has an Accumulated

question 86

Multiple Choice

A village has five residents, each of whom has an accumulated savings of $50. Each villager can use the money to buy a government bond that pays 10 percent interest per year or to buy a year-old goat, send it onto the commons to graze, and sell it after one year. The price of the goat that the villager will get at the end of the year depends on the amount of weight it gains while grazing on the commons, which in turn depends on the number of goats sent onto the commons, as shown in the table below. Assume that if a villager is indifferent between buying a bond and buying a goat, the villager will buy a goat. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Number af gants } \\\text { an the carmuns }\end{array} & \begin{array} { c } \text { Price per 2-year } \\\text { ald poat (5) }\end{array} & \begin{array} { c } \text { Incame per } \\\text { gant (\$/year) }\end{array} \\\hline 1 & 80 & 30 \\\hline 2 & 75 & 25 \\\hline 3 & 70 & 20 \\\hline 4 & 65 & 15 \\\hline 5 & 55 & 5 \\\hline\end{array}$$  
What is the socially optimal number of goats to be sent out onto the commons?

• A)5
• B)4
• C)3
• D)2

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Definitions:

Occipital Lobes

The portion of the cerebral cortex lying at the back of the head; includes areas that receive information from the visual fields.

Association Areas

Areas of the cerebral cortex that are not involved in primary motor or sensory functions; rather, they are involved in higher mental functions such as learning, remembering, thinking, and speaking.

Reticular Formation

A nerve network that travels through the brainstem into the thalamus and plays an important role in controlling arousal.

Limbic System

A complex system of nerves and networks in the brain, involved with instinct and mood, controlling basic emotions and drives.