ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Kenji, Lucia, and Stasia are the only inhabitants of the small island of Tock. Unfortunately, the island lacks a means of telling time. However, the
inhabitants can import a public clock tower from a neighboring island at a cost of $21,000. Once purchased, nothing could prevent any of the island's
inhabitants from using the clock to tell what time it is. The following table shows each individual's benefit from importing the clock tower.
Individual Benefit from a Clock
Kenji
$6,000
Lucia
$9,700
Stasia
$5,700
The total benefit from the clock to Tock is i
Therefore, it
efficient for Kenji, Lucia, and Stasia to purchase the clock.
If the community (Kenji, Lucia, and Stasia, in this case) voted on whether to divide up the cost of the clock into equal shares of $7,000 per
of the community would vote for this option.
person,
Stasia tries unsuccessfully to persuade Lucla and Kenji that the island needs a missile defense system. During their discussion, Stasia and Lucia get
together and introduce a new vote.
The new vote bundles two proposals: the missile defense system and the proposal to divide the cost of the clock tower into equal shares. Kenji still
votes no, but Lucia and Stasia vote yes due to the agreements they made during their earlier discussion to approve the missile and clock proposals
simultaneously. This is an example of
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Transcribed Image Text:Kenji, Lucia, and Stasia are the only inhabitants of the small island of Tock. Unfortunately, the island lacks a means of telling time. However, the inhabitants can import a public clock tower from a neighboring island at a cost of $21,000. Once purchased, nothing could prevent any of the island's inhabitants from using the clock to tell what time it is. The following table shows each individual's benefit from importing the clock tower. Individual Benefit from a Clock Kenji $6,000 Lucia $9,700 Stasia $5,700 The total benefit from the clock to Tock is i Therefore, it efficient for Kenji, Lucia, and Stasia to purchase the clock. If the community (Kenji, Lucia, and Stasia, in this case) voted on whether to divide up the cost of the clock into equal shares of $7,000 per of the community would vote for this option. person, Stasia tries unsuccessfully to persuade Lucla and Kenji that the island needs a missile defense system. During their discussion, Stasia and Lucia get together and introduce a new vote. The new vote bundles two proposals: the missile defense system and the proposal to divide the cost of the clock tower into equal shares. Kenji still votes no, but Lucia and Stasia vote yes due to the agreements they made during their earlier discussion to approve the missile and clock proposals simultaneously. This is an example of
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