Question

Hypothetical Marginal Benefits of Security Protection for a Community of Three People  

	NUMBER OF SECURITY GUARDS PER WEEK
	1	2	3	4
MBA	$300	$250	$200	$150
MBB	$250	$200	$150	$100
MBC	$200	$150	$100	$50
∑MBi	$750	$600	$450	$300

1. Suppose the price or cost of hiring a security guard increases from $450 to $600 per week. Using the data in Table above, show how this will affect the Lindahl equilibrium.
2. Use the data above to show how a decrease in the demand for security protection by any one voter will affect the Lindahl equilibrium.

Answer 1