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 rival and non-excludable. thus, the visual appearance would be classified as a public good. suppose the college administrators estimate that the beautification initiative will cost $4,400. 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 $11.

Question

Sadie Pacheco

Business

1 April, 04:48

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 rival and non-excludable. thus, the visual appearance would be classified as a public good. suppose the college administrators estimate that the beautification initiative will cost $4,400. 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 $11.

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Danika Crosby · Answer 1

In a sense, this is a tradeoff problem. In particular, we see that the cost to do the beautification is 4400$. We need however to calculate what the benefit in dollars would be. Each student thinks that the outcome would be worth 11$ on average. Thus, the whole community is willing to give 3300$=300*11$. This means that the students think that the beautification process should be worth 3300$. Hence, the school will decide against it (because the cost is higher than the benefit turned to equivalent money sum).