A City Is Deliberating Whether to Undertake a Major Infrastructure

question 3

Essay

A city is deliberating whether to undertake a major infrastructure investment to provide free, high-speed WIFI internet access within its city limits. Alternatively, the city could rely on the private sector to provide access. The city estimates internet demand to be P = 20 - 5Q, where Q denotes number of users (in millions) and P is price per month in dollars. The emerging private market for internet access is considered to be highly competitive, and the typical provider exhibits LAC = LMC = $5 per subscriber per month, where LAC is long-run average cost and LMC is long-run marginal cost. According to the city's estimates, the initial cost for constructing the high-speed network is $600 million and network maintenance costs are $80 million per year. Prepare a benefit-cost analysis to guide the city's decision. Assume that the public and private alternatives will last indefinitely, and that each will be held to a 5% discount rate.

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Definitions:

Dramatic Sagas

Intense or exciting stories or series of events that are deeply embedded in the history or culture of an organization.

Worker Involvement

The practice of including employees in decision-making, problem-solving, and improvements within the workplace.

Observable Culture

The visible elements of an organization's culture, such as behaviors, language, symbols, and rituals that can be witnessed and experienced by members and outsiders.

Norms

Established standards of behavior or guidelines that are considered acceptable within a group or society.