Common Property I

The following questions refer to the accompanying diagram, which shows the benefits and costs associated with the use of a common property.

-Refer to Common Property I.Suppose the common property becomes privately owned.The owner behaves competitively and charges people an entrance fee for the right to use the property.The fee will be

Question

Common Property I

The following questions refer to the accompanying diagram, which shows the benefits and costs associated with the use of a common property.

-Refer to Common Property I.Suppose the common property becomes privately owned.The owner behaves competitively and charges people an entrance fee for the right to use the property.The fee will be

Quizplus · Accepted Answer

If the common property becomes privately owned, the owner can charge an entrance fee for its use. The value of the entrance fee would depend on the demand for the property and the owner's pricing strategy. In this case, the owner is behaving competitively, meaning that they are trying to maximize their profits. Therefore, they would set the entrance fee to the point where the marginal cost of allowing one more person to use the property (which is zero since the property is already there) equals the marginal revenue from that person's entrance fee. This would result in a fee of P₂. If we subtract the entrance fee the owner would charge if the property were still a common property (P₁) from the fee they would charge as a private owner (P₂), we get P₂- P₁, which is also a valid option. Therefore, the best choice is C.

Common Property I The Following Questions Refer to the Accompanying Diagram, Which Shows