Question

Paying for a WiFi Network, Consider a small town with 1,000 housoholds. The town could install a wireless WiFi network that would give everyone in town sccess to the Internet. Each household is willing to pay a maximum of $60 per year for the network, and the cost of the syatem is $20,000 per year. Is the WiFi system efficient?

Answer 1

Based on a cost-benefit analysis where the combined willingness to pay by the households is $60,000 and the cost of the WiFi system is only $20,000, the WiFi network is economically efficient due to the surplus value it provides.

Step-by-step explanation:

Is the WiFi system efficient for a small town with 1,000 households willing to pay $60 per year, given it costs $20,000 to maintain annually? To assess efficiency, we calculate the total willingness to pay and compare it to the cost of the system. In this case, the combined willingness to pay of the households (1,000 households × $60 per household) equals $60,000 per year. This sum exceeds the annual cost of $20,000 for the WiFi network. Therefore, the revenue generated from the households will cover the cost of the WiFi system and provide an excess of $40,000, which suggests the system is economically efficient.