Question

Look at the figures below, 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. Benefit: Tax Total benefit - $150 Total cost $900 $700 Benefit: Tax Total benefit - $800 Total cost $900 $300 per person tax $300 per person $350 $350 $300 $300 $250 $200 Lee $100 Garcia (Votes NO 15) Inefficient majority 'yes' vote Inefficient majority o vote Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers

Answer 1

a) Cost of each public good = $300. For Garcia,

Net benefit of first public good = benefits-cost(tax) = $700-$300 = $400

Net benefit of second public good = $100-$300 = -$200

For the two combined = $400-$200 = $200

Yes she will vote on the proposal to fund both projects simultaneously because she gets a positive net combined benefit from the two.

b) Cost of each public good = $300. For Lee,

Net benefit of first public good = benefits-cost(tax) = $200-$300 = -$100

Net benefit of second public good = $350-$300 = $50

For the two combined = -$50

No she will not vote on the proposal to fund both projects simultaneously because she gets a negative net combined benefit from the two.

c) Cost of each public good = $300. For Johnson,

Net benefit of first public good = benefits-cost(tax) = $250-$300 = -$50

Net benefit of second public good = $350-$300 = $50

For the two combined = -$0

He will be indifferent on the proposal to fund both projects simultaneously because he gets a $0 net combined benefit from the two.

d) Median voter is Johnson

Two voters will attempt to pursuade Johnson.