Question

A local college is deciding whether to conduct a campus beautification initiative that would involve various projects, such as planting trees and remodeling buildings, to make the campus more aesthetically pleasing. For the students of the college, the visual appearance of the campus is___and___. Thus, the visual appearance would be classified as a public good.
Suppose the college administrators estimate that the beautification initiative will cost $7,200. To decide whether the initiative should be undertaken, administrators conduct a survey of the college's 300 students, asking each of them their willingness to pay for the beautification project. The average willingness to pay, as revealed by the survey, is $18.
The benefit of the beautification initiative, as suggested by the survey, is $___. Because the estimated benefit is___than the cost, the college administrators____undertake the beautification initiative.
The calculation of the benefit of the beautification initiative relied on the ability of the administrators to capture the true willingness to pay of each student accurately. Which of the following scenarios would cause the survey used by the college administrators to yield misleading data on willingness to pay?
A. Students believe that if the initiative does not happen, the funds for the initiative will not be spent elsewhere.
B. An equal number of male and female students were surveyed.

Answer 1

Answer:

• "non-rival" and "non-excludable".
• $18.

• less
• should not
• A. Students believe that if the initiative does not happen, the funds for the initiative will not be spent elsewhere.

Explanation:

Since the project is simply about planting trees and remodeling buildings so as to make the campus more aesthetically pleasing hence for the students of the college, the visual appearance of the campus can be categorized as non-rival and non-excludable. Meaning, anybody can freely benefit from the project.

The benefit of the beautification initiative is $18 since the average willingness to pay is by the students is $18.

We can thus conclude that the estimated benefit is less than the cost since we are told that $7,200 is the entire cost of the initiative, which when compared to be amount to be contributed has a shortfall (300*$18=$5,400∠$7200). Thus, the college administrators should not undertake the beautification initiative.