Assume a company has a cafeteria where it lets all its workers eat without making them pay up front. Instead, at the end of the month the total cost of eating at the company cafeteria is added up and divided by the total number of workers. This amount is then deducted from each worker's paycheck. Explain how this practice may lead to a negative externality.

Question

Quizplus · Accepted Answer

The Answer is Since each person faces a marginal cost of zero of dining of zero. This will lead many workers to eat more than they otherwise would if they faced the true cost of their meals. This could result in many of the workers overeating that may make for a less healthy workforce.

Assume a Company Has a Cafeteria Where It Lets All