Two towns, each with three members, arc deciding whether to put on a fireworks display to celebrate the New Year. Fireworks cost $360. In each town, some people enjoy fireworks more than others. a. In the town of Bayport, each of the residents values the public good as follows: Would fireworks pass a cost benefit analysis? Explain. b. The mayor of Bayport proposes to deride by majority’ rule and, if the fireworks referendum passes, to split the cost equally among all residents. Who would vote in favor, and who would vote against? Would the vote yield the same answer as the cost-benefit analysis? c. In the town of River Heights, each of the residents values the public good as follows: Would fireworks pass a cost-benefit analysis? Explain. d. The mayor of River Heights also proposes to decide by majority rule and. if the fireworks referendum passes, to split the cost equally among all residents. Who would vote in favor, and who would vote against? Would the vote yield the same answer as the cost-benefit analysis? e. What do you think these examples say about the optimal provision of public goods?

BuyFind

Principles of Economics (MindTap C...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305585126
BuyFind

Principles of Economics (MindTap C...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305585126

Solutions

Chapter
Section
Chapter 11, Problem 7PA
Textbook Problem

Two towns, each with three members, arc deciding whether to put on a fireworks display to celebrate the New Year. Fireworks cost $360. In each town, some people enjoy fireworks more than others.

a. In the town of Bayport, each of the residents values the public good as follows:

Chapter 11, Problem 7PA, Two towns, each with three members, arc deciding whether to put on a fireworks display to celebrate , example  1

Would fireworks pass a cost benefit analysis? Explain.

b. The mayor of Bayport proposes to deride by majority’ rule and, if the fireworks referendum passes, to split the cost equally among all residents. Who would vote in favor, and who would vote against? Would the vote yield the same answer as the cost-benefit analysis?

c. In the town of River Heights, each of the residents values the public good as follows:

Chapter 11, Problem 7PA, Two towns, each with three members, arc deciding whether to put on a fireworks display to celebrate , example  2

Would fireworks pass a cost-benefit analysis? Explain.

d. The mayor of River Heights also proposes to decide by majority rule and. if the fireworks referendum passes, to split the cost equally among all residents. Who would vote in favor, and who would vote against? Would the vote yield the same answer as the cost-benefit analysis?

e. What do you think these examples say about the optimal provision of public goods?

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