A village has five residents, each of whom has an accumulated savings of $50. Each villager can use the money to buy a government bond that pays 10 percent interest per year or to buy a year-old goat, send it onto the commons to graze, and sell it after one year. The price of the goat that the villager will get at the end of the year depends on the amount of weight it gains while grazing on the commons, which in turn depends on the number of goats sent onto the commons, as shown in the table below. Assume that if a villager is indifferent between buying a bond and buying a goat, the villager will buy a goat. $$\begin{array} { | c | c | c | }
\hline \begin{array} { c }
\text { Number af gants } \
\text { an the carmuns }
\end{array} & \begin{array} { c }
\text { Price per 2-year } \
\text { ald poat (5) }
\end{array} & \begin{array} { c }
\text { Incame per } \
\text { gant (\$/year) }
\end{array} \
\hline 1 & 80 & 30 \
\hline 2 & 75 & 25 \
\hline 3 & 70 & 20 \
\hline 4 & 65 & 15 \
\hline 5 & 55 & 5 \
\hline
\end{array}$$
If each villager is purely self-interested, how many goats will be sent onto the commons?
A)2
B)3
C)4
D)5

Question

A village has five residents, each of whom has an accumulated savings of $50. Each villager can use the money to buy a government bond that pays 10 percent interest per year or to buy a year-old goat, send it onto the commons to graze, and sell it after one year. The price of the goat that the villager will get at the end of the year depends on the amount of weight it gains while grazing on the commons, which in turn depends on the number of goats sent onto the commons, as shown in the table below. Assume that if a villager is indifferent between buying a bond and buying a goat, the villager will buy a goat. $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Number af gants } \
\text { an the carmuns }
\end{array} & \begin{array} { c } 
\text { Price per 2-year } \
\text { ald poat (5) }
\end{array} & \begin{array} { c } 
\text { Incame per } \
\text { gant (\$/year) }
\end{array} \
\hline 1 & 80 & 30 \
\hline 2 & 75 & 25 \
\hline 3 & 70 & 20 \
\hline 4 & 65 & 15 \
\hline 5 & 55 & 5 \
\hline
\end{array}$$  
If each villager is purely self-interested, how many goats will be sent onto the commons?
A)2
B)3
C)4
D)5

Quizplus · Accepted Answer

Each villager, acting in their own self-interest and without coordination, will choose to buy a goat because even at the lowest income per goat ($5/year when all 5 goats are on the commons), it is still more profitable than buying a government bond that pays 10 percent interest on $50 ($5/year). Since villagers prefer buying a goat when indifferent, all five will choose to buy and send a goat onto the commons.

A Village Has Five Residents, Each of Whom Has an Accumulated