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

question 65

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% 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 table below. Assume that if a villager is indifferent between buying a bond and buying a goat, the villager will buy a goat. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Number of goats } \\\text { on the commons }\end{array} & \begin{array} { c } \text { Price per 2-year } \\\text { old goat (\$) }\end{array} & \begin{array} { c } \text { Income per goat } \\\text { (\$/year) }\end{array} \\\hline 1 & 80 & 30 \\\hline 2 & 75 & 25 \\\hline 3 & 70 & 20 \\\hline 4 & 65 & 15 \\\hline 5 & 55 & 5 \\\hline\end{array}$$ If the villagers purchase the socially optimal number of goats and bonds, then total village income will be ______.

• A)$250
• B)$125
• C)$70
• D)$15

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Definitions:

Potato Farmers

are agricultural producers specializing in growing potatoes as their primary crop.

Federal Agency

An organization part of the government of the United States that operates either independently or under the direct administration of federal executive departments.

Farm Subsidies

Governmental grants provided to farmers to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities.

Agricultural Interests

Concerns or advantages related to the farming industry, including crop production, livestock management, and agricultural policy impacts.