Micro Topic 6.
3
Public and Private Goods
Part 1: Check for Understanding- Brazil hosted the 2014 FIFA World Cup and reportedly spent $3.6
billion US Dollars on twelve new and refurbished stadiums. The table below shows the estimated
capacity, cost, events per year, and total attendance for four of these stadiums four years after the World
Cup. Use the data in the table to answer the questions.
[Source: “Were the Billions Brazil Spent on World Cup Stadiums Worth It?.” FiveThirtyEight, June, 2014, [Link].]
1. On average, how much did the Brazilian government spend on each fan that visited the Estadio do
Maracana in Rio? Explain how you got your answer. $600 = Total cost divided by total attendance.
2. Assume that each fan was willing to pay up to $200 for each event in the Arena Pantanal in Cuiaba.
Based on the monetary benefits and costs alone, should the government have built the stadium? Explain
your answer. No, the stadium shouldn’t have been built. The fans are willing to pay $200 but the cost for
each fan is over $80,000 ($250 million divided by 3,000). The marginal social cost is likely higher than the
marginal social benefit.
3. Which stadium above provided the most value to the citizens of Brazil? Use data to justify your answer.
The Estadio do Maracana in Rio. The cost per fan is $600 and it has the most events (57) and highest
total attendance (800,000).
4. Which stadium above provided the least value to the citizens of Brazil? Use data to justify your answer.
The Arena de Amazonia in Manus. The cost per fan is $150,000 and it holds the fewest events (4) and
has the lowest total attendance (2,000)
5. Identify one reason why the government might overspend when hosting the World Cup or the
Olympics. Trying to impress other countries. Irrationally excited about hosting. Unanticipated costs.
6. Assume that a government official defends the spending on stadiums by pointing out that the stadiums
will be used for a long time and that building them created more jobs. Pick one of these two claims and
explain why it is not an economically sound argument. Answers will vary. Several of the stadiums would
need to be used for hundreds of years to make them cost effective and stadiums usually don’t last that
long. The money and resources that were used to make the stadiums could have been used to make
other things that are more valuable for society like hospitals or schools. Those other projects would have
created just as many jobs.
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Micro Topic 6.3
Public and Private Goods
Part 2 - Practice : The city of Cliffordville is trying to determine how many public parks it would like to
build. The city is divided into the East side and the West side. The table below shows the taxes that
citizens on the East side and the West side are willing to pay for different quantities of parks.
7. Fill in the chart and calculate the marginal social
benefit (MSB) for all the citizens in Cliffordville.
8. Graph the MSB and marginal social cost (MSC) for
Cliffordville assuming that each park costs $50.
9. What rule should Cliffordville use to determine how many parks to build? Continue to build parks until
the MSB = MSC
10. How many parks would the East side build if they received no money from the West side?
2 parks
11. How many parks should the citizens of Cliffordville build? How did you get your answer?
6 parks, MSB = MSC
12. Use the data in the table above to explain why Cliffordville should never produce a total of eight public
parks. The MSB of the 8th park is $35 but the park costs $50. 8 parks is too many.
13. How many parks should the citizens of Cliffordville build if each park costs $90 to build?
2 parks, the marginal social benefit is $95 and the marginal social cost is $90.
Part 3: Stretching Your Thinking- Answer the following question.
14. In November of 2016, the voters of San Diego, California (USA) decided not to pay $1.15 billion for a
new football stadium. The football team subsequently moved to Los Angeles and the city no longer has
an NFL football team. Do you think that voters made the right decision? Make sure to fully justify your
answers. Answers will vary. They might focus on implicit benefits and costs in addition to economic
benefits and costs.
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