Consider the city of Widgetapolis with only four residents, John, James, Mary, and Lydia. The four residents are trying to determine how many hours to spend in cleaning up the public lake. The table below shows each resident’s willingness to pay for each hour of cleaning. Refer to Table 11-6. Suppose the cost to clean the lake is $32 per hour and that the residents have agreed to split the cost of cleaning the lake equally. It would maximize Lydia's surplus if 6 hours of cleaning is done.
a. True
b. False
Answer: False.
The cost to clean the lake for each resident is $8 per hour (32÷4). Lydia's willingness to pay for 6 hours is $5 and the cost to clean the lake for her is $8. In other words her willingness to pay is less than the cost that she will bear. So the statement is False.
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