Question

1. You are in a group of 20 people that all go out to eat at a nice restaurant. The group has a choice of either simply splitting the bill equally or going through the hassle of each person paying for their individual meal. Will the average cost per meal be the same regardless of which strategy is employed? Explain.

2. Four roommates are thinking about hiring a $100 / week cleaning service. The roommates value this weekly service differently as follows:

• Josh values it at $20
• Joaquim values it at $40
• X Æ A-12 values it at $30
• Apple values it as $20

Once the good (a clean apartment) is provided, there is no way to prevent one roommate from benefing (non-excludable) and the fact that it is clean for one person does not diminish it for others (non-rival) .

Based on this on this set-up, discuss the following questions:

Should it by provided? What is your criteria?

Will it by provided? (There is no one correct answer here... just think through different scenarios)

Answer 1

Answer 1.

Average cost will remain the same irrespective of the strategy used.

Average cost per person= Total cost/ Total number of people.

Total cost is equal to the Total money spend by the group.

Since neither total cost changes nor the number of people(20) changes there will not be any change in the average cost per meal irrespective of what strategy is used.

Note-According to HOMEWORKLIB RULES first question can be answered