(See Problem 2

question 16

Multiple Choice

(See Problem 2.) A small community has 20 people, each of whom has a wealth of $12,000. Each individual must choose whether to contribute $300 or $0 to the support of public entertainment for their community. The money value of the benefit that a person gets from this public entertainment is b times the total amount of money contributed by individuals in the community.

• A) If 20b > 1, everybody is better off if all contribute to the public entertainment fund than if nobody contributes, but if 20b < 1, everybody is better off if nobody contributes than if all contribute.
• B) If 20b > 1, there is a dominant strategy equilibrium in which everybody contributes.
• C) Everybody is worse off if all contribute than if nobody contributes if b > 1, but if b < 1, everybody is better off if nobody contributes.
• D) This game has a dominant strategy equilibrium in which nobody contributes anything for public entertainment.
• E) In order for there to be a dominant strategy equilibrium in which all contribute, it must be that b > 20.

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Definitions:

Derived Demand

The demand for a product or service that arises from the demand for another product or service it helps to produce.

Catgut

A type of cord made from the natural fibres of an animal's intestines, commonly used in the past for musical instrument strings and surgical sutures.

Innovators

Individuals or companies that introduce new products, services, or methods, often opening up new markets or changing existing ones.