Author Question: Denise is thinking about setting up a butterfly garden in her backyard. She estimates that it will ... (Read 125 times)

skymedlock · **on:** Jun 30, 2018

Denise is thinking about setting up a butterfly garden in her backyard. She estimates that it will cost her 2,000 to purchase and install special plants and an irrigation system to attract butterflies. The benefit she expects to receive is 1,800 . In addition, neighbor Billy will receive a benefit of 150 and neighbor Sammy will receive a benefit of 100 . From this, we can conclude that:
a. butterflies are a negative externality for Billy and Sammy.
b. Denise will set up the butterfly garden without any help from her free-rider neighbors.
c. if Sammy refuses to contribute to the butterfly garden, he will be unable to enjoy its benefits if it is built.
d. if Billy refuses to contribute to the butterfly garden, Denise will not have one.
e. if Billy and Sammy contribute the amounts at which they value the butterfly garden, Denise will set it up.

Question 2

The reason individual homeowners usually do not hire a private contractor to fill the potholes on their street is because:
a. it costs too much.
b. the value to the neighborhood exceeds the cost of repair.
c. others who use the street will be free riders.
d. they do not trust the government.
e. there are negative externalities associated with the repair.