Short free-response question
Fireworks over Lake Harmon
- Unit 6
- 5 points
- About 12 minutes
You can use a calculator on this question, just like on exam day.
A shorter question with a few lettered parts on one situation, often built on a table, a payoff matrix or a given or described graph. You make claims, explain them, calculate a value, or describe a labeled graph and show a change on it. On the exam: Questions 2 and 3 of 3 in Section II; 5 points each, a quarter of the section score each. About 12 minutes suggested for each. Four-function calculator allowed.
The question and its sources
Ana, Ben, and Cal are the only three residents of a small lakeside town. The town is considering paying for fireworks shows over the lake, which everyone in town can see from their homes. Each show costs $30. The table shows each resident's marginal benefit from each show.
Table 1. Marginal benefit from each fireworks show
| Show | Ana's marginal benefit | Ben's marginal benefit | Cal's marginal benefit |
|---|---|---|---|
| 1st | $30 | $20 | $10 |
| 2nd | $20 | $15 | $8 |
| 3rd | $12 | $10 | $5 |
| 4th | $6 | $5 | $2 |
Source: Hypothetical data
Suggested time: 12 minutes
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Part (a)
1 pointIdentify the type of good a fireworks show over the lake is, and explain using its two characteristics.
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Part (b)
1 pointExplain why a private firm would be unlikely to provide the efficient number of fireworks shows.
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Part (c)
1 pointCalculate the marginal social benefit of the second show. Show your work.
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Part (d)
1 pointIdentify the socially optimal number of fireworks shows. Explain.
0 / 2,500 characters
Part (e)
1 pointThe fish in Lake Harmon can be caught by anyone, and one person's catch leaves fewer fish for others. Explain why the lake's fish are likely to be overused.
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