Nine friends who love the beach decide to pool their financial resources and equally share the cost of a one-week house rental on Nantucket. Suppose that the beach outside of the house becomes more congested when the nine additional people join the other beachgoers. Which of the following statements is not correct?
A)Use of the beach by the nine new beachgoers will yield a negative externality.
B)The town can reduce the congestion externality by raising the fee to access the beach.
C)An increase in the fee to access the beach could be viewed as a corrective tax on the externality of congestion.
D)Each of the nine friends would have been better off staying at home.

Question

Quizplus · Accepted Answer

This statement is not necessarily correct as it assumes that the friends derive no benefit from being on the beach despite their willingness to pool their resources and rent a house on Nantucket. While it is true that the addition of nine more beachgoers can increase congestion and decrease the enjoyment of the beach for others, it does not necessarily mean that the nine friends would have been better off staying at home. They may still derive satisfaction from being on the beach and enjoying the amenities of the rental house with their friends, even with the added congestion.

Nine Friends Who Love the Beach Decide to Pool Their