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Look back at Figures 5.2a and 5.2b, which show the costs and benefits to voters Garcia, Johnson, and Lee of two different public goods that the government will produce if a majority of voters support them. Suppose that Garcia, Johnson, and Lee have decided to have one single vote at which the funding for both of those public goods will be decided simultaneously.

a. Given the $300 cost per person of each public good, what are Garcia鈥檚 net benefits for each public good individually and for the two combined? Will she vote yes or no on the proposal to fund both projects simultaneously?

b. What are Lee鈥檚 net benefits for each public good individually and for the two combined? Will she vote yes or no on the proposal to fund both projects simultaneously?

c. What are Johnson鈥檚 net benefits for each public good individually and for the two combined? Will he vote yes or no on the proposal to fund both projects simultaneously鈥攐r will he be indifferent?

d. Who is the median voter here? Whom will the two other voters be attempting to persuade?

Short Answer

Expert verified

a.The net benefit from the first public good is $400.

The net benefit from the second public good is -$200.

The combined net benefit from both public goods is $200.

Garcia will say yes to the proposal.

b. The net benefit from the first public good is -$100.

The net benefit from the second public good is $50.

The combined net benefit from both public goods is -$50.

Lee will say no to the proposal.

c. The net benefit from the first public good is -$50.

The net benefit from the second public good is $50.

The combined net benefit from both public goods is $0.

Johnson is indifferent to the proposal.

d. Johnson is the median voter.

The other two will try to persuade Johnson.

Step by step solution

01

Explanation for part (a)

The net benefit of a public good is calculated by subtracting the cost of getting the public good and the gain received from its consumption.

  • Garcia pays $300 as tax and receives $700 worth of benefits from the first public good. Thus, the net benefit from the first public good is $400, as shown below:NB1=Benefit-Cost(Tax)=700-300=$400
  • Garcia pays $300 as tax and receives $100 worth of benefits from the second public good. Thus, the net benefit from the second public good is -$200, as shown below: NB2=Benefit-Cost(Tax)=100-300=-$200
  • The combined net benefit from the consumption of both public goods is $200, as calculated below:CNB=NB1+NB2=400+-200=$200
  • Since the combined net benefit is positive(=$200), Garcia will say yes to fund both the public goods simultaneously.
02

Explanation for part (b)

Consider the following points.

  • Lee pays $300 as tax and receives $200 worth of benefits from the first public good. Thus, the net benefit from the first public good is -$100, as shown below:NB1=Benefit-Cost(Tax)=200-300=-$100
  • Lee pays $300 as tax and receives $350 worth of benefits from the second public good. Thus, the net benefit from the second public good is $50, as shown below:NB2=Benefit-Cost(Tax)=350-300=$50
  • The combined net benefit from the consumption of both public goods is -$50, as calculated below:CNB=NB1+NB2=-100+50=-$50
  • Since the combined net benefit is negative (=-$50), Lee will say no to funding both the public goods simultaneously.
03

Explanation for part (c)

Consider the following points.

  • Johnson pays $300 as tax and receives $250 worth of benefits from the first public good. Thus, the net benefit from the first public good is -$50, as shown below:NB1=Benefit-Cost(Tax)=250-300=-$50
  • Johnson pays $300 as tax and receives $350 worth of benefits from the second public good. Thus, the net benefit from the second public good is $50, as shown below:NB2=Benefit-Cost(Tax)=350-300=$50
  • The combined net benefit from the consumption of both public goods is -$50, as calculated below:CNB=NB1+NB2=-50+50=$0
  • Since the combined net benefit is zero, Johnson remains indifferent; he can say yes or no to fund the public goods simultaneously.
04

Explanation for part (d)

Johnson is the median voter as he holds a middle position whether or not to fund the proposal. The other will try to persuade him towards their extreme position to say yes or no to form a majority since there are only three voters.

Garcia will try to convince him to say yes as her benefits exceed the cost (positive combined net benefit). Lee will try to convince him to say no to the proposal as her cost is more than her benefits (negative combined net benefit).

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Most popular questions from this chapter

Use your demand schedule for the public good, determined in problem 1, and the following supply schedule to ascertain the optimal quantity of this public good.

Price (\()
Qd
191
162
133
104
75
46
27
18
Price (\))Qs
1910
168
136
104
72
41
2-
1-

Suppose that total costs (TC) double for each project listed in Table 5.2. Which project(s) is (are) now economically viable?

a. Plan A only

b. Plans C and D only

c. Plans B and C

d. Plans A and B only

Plan
Total cost of project (\()
Marginal cost (\))
Total Benefit
Marginal Benefit
Net Benefit (TB-TC)
No new construction
0-0--
A: Widen existing highways
100-200--
B: New 2-lane highways
280-350--
C: New 4-lane highways
480-470--
D: New 6-lane highways
1240-580--

We can apply voting paradoxes to the highway construction example of Table 5.2. Suppose there are only five people in a society, and each favors one of the five highway construction options listed in Table 5.2 (鈥淣o new construction鈥 is one of the five options). Explain which of these highway options will be selected using a majority paired-choice vote. Will this option be the optimal size of the project from an economic perspective?

Plan
Total cost of project (\()
Marginal cost (\))
Total Benefit
Marginal Benefit
Net Benefit (TB-TC)
No new construction
0-0--
A: Widen existing highways
5050200200150
B: New 2-lane highways
14090350150210
C: New 4-lane highways
240100470120230
D: New 6-lane highways
620380580110-40

Does traditional one-person-one-vote (1p1v) majority voting allow voters to directly express differences in strengths of preference? Does quadratic voting do any better? Discuss the differences and then explain which system you prefer, and why.

How does the problem of limited and bundled choice in the public sector relate to economic efficiency? Why are public bureaucracies possibly less efficient than business firms?

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