- 7 Ch 11 Problems And Applications Q5 Four Roommates Are Planning To Spend The Weekend In Their Dorm Room Watching Old 1 (67.41 KiB) Viewed 13 times
movies in order to maximize If it costs $12 to rent a movie, the roommates should rent the total surplus. Suppose the roommates choose to rent the optimal number of movies you just indicated and then split the cost of renting equally. This means that each roommate will pay $ Complete the following table with each roommate's total willingness to pay for this many movies and the surplus each person obtains from watching the movies. Total Willingness to Pay Consumer Surplus (Dollars) (Dollars) Roommate Nick Tim Brian Edison In order to split the cost in a way that ensures that everyone benefits, the cost could be divided up based on the benefits each roommate receives. The practical problem with this solution is that each roommate has an incentive to the value of the movies to him. understate agree in advance to choose the efficient number and to split the cost of the movies overstate True or False: When Nick is asked his willingness to pay, he will have an incentive to understate the value of the movies to him. True o False This examples teaches you that the optimal provision of a public good will occur if individuals an incentive to hide their valuation of the good.