The condominium owners in a community of seven identical condominiums understand that improvements to the landscaping...

 

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The condominium owners in a community of seven identical condominiums understand that improvements to the landscaping of the public spaces in the community and to community infrastructure will raise the value of all the condominiums in the community. However, the gains in property values must be balanced against the opportunity cost of time for those owners who do the improvements. The information below applies to this condominium community. The first two columns show a list of landscaping and infrastructure tasks that could be undertaken, and how much each task would raise the total value of property in the neighborhood. (The gain in total value is spread evenly over the seven condominiums in the neighborhood, and everyone in the neighborhood knows and agrees upon the gain created by each task). The second two columns list the residents of the neighborhood, and the opportunity cost of a day of time for each resident. Each resident has 1 day available for the work, and each task takes one day. Total Increase in Property values Opportunity Cost Tasks Plant flowers in median Install streetlights Repave the roads Repair sprinkler system Repair sidewalk Plant trees Plant lilacs Repair curbs $400 $1,100 $1000 $700 $900 $300 $250 $350 Resident John Angela James Ruth Michael Charlotte Joseph d) What tasks should be done? a) Construct and plot on a single graph the marginal benefit and marginal cost schedules for home repair tasks. (Hint: the horizontal axis of this graph is the number tasks undertaken in the neighborhood, and the vertical axis is the marginal cost/benefit to the neighborhood of each task. The marginal benefit line should start with the task that generates the most benefit; the marginal cost line should start with the person with the lowest cost). $750 $800 $900 $550 $850 $150 $400 b) What is the optimal amount of time to devote to improvements in the community? c) Who should devote time to making improvements? e) If there were no condominium community organization to coordinate the improvement program, could we expect people in the neighborhood to undertake these maintenance tasks on their own? If so, which ones? If not, why not? The condominium owners in a community of seven identical condominiums understand that improvements to the landscaping of the public spaces in the community and to community infrastructure will raise the value of all the condominiums in the community. However, the gains in property values must be balanced against the opportunity cost of time for those owners who do the improvements. The information below applies to this condominium community. The first two columns show a list of landscaping and infrastructure tasks that could be undertaken, and how much each task would raise the total value of property in the neighborhood. (The gain in total value is spread evenly over the seven condominiums in the neighborhood, and everyone in the neighborhood knows and agrees upon the gain created by each task). The second two columns list the residents of the neighborhood, and the opportunity cost of a day of time for each resident. Each resident has 1 day available for the work, and each task takes one day. Total Increase in Property values Opportunity Cost Tasks Plant flowers in median Install streetlights Repave the roads Repair sprinkler system Repair sidewalk Plant trees Plant lilacs Repair curbs $400 $1,100 $1000 $700 $900 $300 $250 $350 Resident John Angela James Ruth Michael Charlotte Joseph d) What tasks should be done? a) Construct and plot on a single graph the marginal benefit and marginal cost schedules for home repair tasks. (Hint: the horizontal axis of this graph is the number tasks undertaken in the neighborhood, and the vertical axis is the marginal cost/benefit to the neighborhood of each task. The marginal benefit line should start with the task that generates the most benefit; the marginal cost line should start with the person with the lowest cost). $750 $800 $900 $550 $850 $150 $400 b) What is the optimal amount of time to devote to improvements in the community? c) Who should devote time to making improvements? e) If there were no condominium community organization to coordinate the improvement program, could we expect people in the neighborhood to undertake these maintenance tasks on their own? If so, which ones? If not, why not?

Answer rating: 100% (QA)

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