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Four roommates are planning to spend the weekend in their dorm room watching old movies, and they are debating how many to watch. Here is their willingness to pay for each film: Willingness to Pay (Dollars) Paolo Van Carlos Felix First film 10 9 6 Second film 97 42 Third film Fourth film Fifth film t》 Within the dorm room, the showing of a moviea public good If it costs $8 to rent a movie, the roommates should rent movies in order to maximize the total surplus. Suppose the roommates choose to rent the optal number of movies you just indicated and then split the cost of renting equally. This means that each roommate will pay$ Complete the following table with each roommates total willingness to pay for this many movies and the surplus each person obtains from watching the movies. Total Willingness to Pay Consumer SurplusComplete the following table with each roommates total willingness to pay for this many movies and the surplus each person obtains from watching the movies. Total Willingness to Pay Consumer Surplus (Dollars) Roommate Paolo Van Carlos Felix In order to split the cost in a way that ensures that everyone benefits, the cost could be divided up based on the benefits each roommate receives. The practical problem with this solution is that each roommates has an incentive to the value of the movies to him. Suppose they agree in advance to choose the efficient number and to split the cost of the movies equally. True or False: When Paolo is asked his willingness to pay, he will have an incentive to understate the value of the movies to him. True False This examples teaches you that the optimal provision of a public good will occur if individuals the good an incentive to hide their valuation of

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