Assume that each day ten thousand children watch Sesame Street on public television and that the educational benefits of watching Sesame Street generate private benefits of $100 per child per year and a positive externality of $50 per child per year.No products are advertised on Sesame Street but once a year the stations hold a pledge drive.During pledge drives viewers are asked to make voluntary contributions to the public station in order to keep the programming viable.
If the public television stations collect less than $100 per child during the pledge drives it is evidence that

Question

Quizplus · Accepted Answer

If the public television stations collect less than $100 per child during the pledge drive, it indicates that some viewers are free riders who are enjoying the positive externalities of the program without contributing to its financial sustainability. This is because the private benefits of watching Sesame Street are worth $100 per child per year, and if viewers were valuing the external benefits at $50 per child per year, they would voluntarily contribute at least $50 per child during the pledge drive. Therefore, the shortfall in donations suggests that some viewers are not contributing their fair share towards the public good. The other options are not relevant to the given scenario.

Assume That Each Day Ten Thousand Children Watch Sesame Street