5. Distribution of benefits and costs The Assembly, the legislature of the fictional country of Manufa, is considering legislation that will generate benefits of $25 million and costs of $21 million. For perspective, Manufa's population is 50 million. Passing the legislation is , and if everyone in Manufa shared equally in both its benefits and its costs, the Assembly will vote the legislation. If the benefits of the legislation are concentrated among a few people instead of widespread among the population, those people will be willing to spend up to lobbying the Assembly for the legislation. (Note: Assume that the costs are widespread; therefore, you can ignore them in the calculations of the few who experience the benefits.) The more widely spread are the costs of the legislation, the is the likelihood of lobbying against the legislation by those who will incur its costs. Suppose that, as before, the benefits of the legislation are concentrated among a small group, but the costs of the legislation are concentrated among another small group, and the Assembly is responsive to lobbying. The people who will be harmed by the legislation will be willing to spend on lobbying up to , in which case the Assembly will likely vote the legislation.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5. Distribution of benefits and costs

The Assembly, the legislature of the fictional country of Manufa, is considering legislation that will generate benefits of $25 million and costs of $21 million. For perspective, Manufa's population is 50 million.

Passing the legislation is , and if everyone in Manufa shared equally in both its benefits and its costs, the Assembly will vote the legislation.

If the benefits of the legislation are concentrated among a few people instead of widespread among the population, those people will be willing to spend up to lobbying the Assembly for the legislation. (Note: Assume that the costs are widespread; therefore, you can ignore them in the calculations of the few who experience the benefits.)

The more widely spread are the costs of the legislation, the is the likelihood of lobbying against the legislation by those who will incur its costs.

Suppose that, as before, the benefits of the legislation are concentrated among a small group, but the costs of the legislation are concentrated among another small group, and the Assembly is responsive to lobbying. The people who will be harmed by the legislation will be willing to spend on lobbying up to , in which case the Assembly will likely vote the legislation.

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