A Village Has Five Residents,each of Whom Has Accumulated Savings

question 5

Multiple Choice

A village has five residents,each of whom has 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. $$\begin{array} { c c c } \begin{array} { c } \text { Number of goats } \\\text { on the commons }\end{array} & \begin{array} { c } \text { Price per 2-year-old } \\\text { goat (\$) }\end{array} & \begin{array} { c } \text { Income per goat } \\\text { (\$/year) }\end{array} \\1 & 80 & 30 \\2 & 75 & 25 \\3 & 70 & 20 \\4 & 65 & 15 \\5 & 55 & 5\end{array}$$
Refer to the information given above.Suppose a village elder decides the total number of goats and bonds with the goal of maximizing total village income.The elder will buy _____ government bond(s) and send ____ goat(s) onto the commons.

• A) 0;5
• B) 1;4
• C) 2;3
• D) 3;2

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Definitions:

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The Tragedy of the Commons is an economic theory describing a situation within a shared-resource system where individual users acting independently according to their own self-interests behave contrary to the common good, depleting or spoiling the shared resource through their collective action.