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Question: hubert and manuel are considering contributing toward the creation of...

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Hubert and Manuel are considering contributing toward the creation of a public park. Each can choose whether to contribute $300 to the public park or to keep that $300 for a pool table. Since a public park is a public good, both Hubert and Manuel will benefit from any contributions made by the other person. Specifically, every dollar that either one of them contributes will bring each of them 0.70 of benefit. For example, if both Hubert and Manuel choose to contribute, then a total of $600 would be contributed to the public park. So, Hubert and Manuel would each receive $420 of benefit from the public park, and their combined benefit would be $840. This is shown in the upper left cell of the first table. Since a pool table is a private good, if Hubert chooses to spend $300 on a pool table, Hubert would get $300 of benefit from the pool table and Manuel wouldnt receive any benefit from Huberts choice. If Hubert still spends $300 on a pool table and Manuel chooses to contribute $300 to the public park, Hubert would still receive the $210 of benefit from Manuels generosity. In other words, if Hubert decides to keep the $300 for a pool table and Manuel decides to contribute the $300 to the public project, then Hubert would receive a total benefit of $300 + $210 = $510, Manuel would receive a total benefit of $210, and their combined benefit would be $720. This is shown in the lower left cell of the first table. Complete the following table, which shows the combined benefits of Hubert and Manuel as previously described Manuel Contributes Doesnt contribute Contributes $840 Hubert Doesnt contribute $720 Of the four cells of the table, which gives the greatest combined benefits to Hubert and Manuel? When neither Hubert nor Manuel contributes to the public park when Hubert contributes to the public park and Manuel doesnt, or vice versa When both Hubert and Manuel contribute to the public parkNow, consider the incentive facing Hubert individually. The following table looks similar to the previous one, but this time, it is partially completed with the individual benefit data for Hubert. As shown previously, if both Hubert and Manuel contribute to a public good, Hubert receives a benefit of $420. On the other hand, if Manuel contributes to the public park and Hubert does not, Hubert receives a benefit of $510. Complete the right-hand column of the following table, which shows the individual benefits of Hubert. Hint: You are not required to consider the benefit of Manuel. Manuel Contribute Doesnt contribute Contribute $420, Doesnt contribute $510, Hubert not to contribute contribute- If Manuel decides to contribute to the public park, Hubert would maximize his benefit by choosing other hand, if Manuel decides not to contribute to the public park, Hubert would maximize his benefit by choosing park to the public park. On the to the public the tragedy of the commons the creation of a positive externality why markets are efficient the free-rider problem not to contribute contribute These results illustrate

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