Answer Happy

3. Voluntary contributions toward a public good Sean and Bob areconsidering contributing toward the creation of a building mural.Each can choose whether to contribute $400 to the building mural orto keep that $400 for a cell phone. Since a building mural is apublic good, both Sean and Bob will benefit from any contributionsmade by the other person. Specifically, every dollar that eitherone of them contributes will bring each of them $0.70 of benefit.For example, if both Sean and Bob choose to contribute, then atotal of $800 would be contributed to the building mural. So, Seanand Bob would each receive $560 of benefit from the building mural,and their combined benefit would be $1,120. This is shown in theupper left cell of the first table. Since a cell phone is a privategood, if Sean chooses to spend $400 on a cell phone, Sean would get$400 of benefit from the cell phone and Bob wouldn't receive anybenefit from Sean's choice. If Sean still spends $400 on a cellphone and Bob chooses to contribute $400 to the building mural,Sean would still receive the $280 of benefit from Bob's generosity.In other words, if Sean decides to keep the $400 for a cell phoneand Bob decides to contribute the $400 to the public project, thenSean would receive a total benefit of $400+$280=$680, Bob wouldreceive a total benefit of $280, and their combined benefit wouldbe $960. This is shown in the lower left cell of the first table.Complete the following table, which shows the combined benefits ofSean and Bob as previously described. Bob Contributes Doesn'tcontribute Sean Contributes $1,120 $ Doesn't contribute $960 $ Ofthe four cells of the table, which gives the greatest combinedbenefits to Sean and Bob? When both Sean and Bob contribute to thebuilding mural When Sean contributes to the building mural and Bobdoesn't, or vice versa When neither Sean nor Bob contributes to thebuilding mural Now, consider the incentive facing Seanindividually. The following table looks similar to the previousone, but this time, it is partially completed with the individualbenefit data for Sean. As shown previously, if both Sean and Bobcontribute to a public good, Sean receives a benefit of $560. Onthe other hand, if Bob contributes to the building mural and Seandoes not, Sean receives a benefit of $680. Complete the right-handcolumn of the following table, which shows the individual benefitsof Sean. Hint: You are not required to consider the benefit ofBob.
Bob Contribute Doesn't contribute Sean Contribute $560, -- $ ,-- Doesn't contribute $680, -- $ , -- If Bob decides to contributeto the building mural, Sean would maximize his benefit by choosingto the building mural. On the other hand, if Bob decides not tocontribute to the building mural, Sean would maximize his benefitby choosing to the building mural. These results illustrate .