Suppose the college administrators estimate that the beautification initiative will cost $4,420. To decide whether the initiative should be undertaken, administrators conduct a survey of the college's 260 students, asking each of them their willingness to pay for the beautification project. The average willingness to pay, as revealed by the survey, is $13.

Full Question:

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 $4,420. To decide whether the initiative should be undertaken, administrators conduct a survey of the college's 260 students, asking each of them their willingness-to-pay for the beautification project. The average willingness-to-pay, as revealed by the survey, is $13.

The benefit of the beatification initiative, as suggested by the survey, is ?

$3380

Explanation:

The benefit of beautification initiative as suggested by survey = the average amount each student is willing to pay × total number of students.

Given that average amount = $13

Total number of student = 260

Thus,

= 13 × 260

= $3380.

The implication of this is that, since it is less than the estimated beautification initiative cost ($4420), the college administrators should not undertake the beautification initiative.

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