The town of Smallsville is considering building a museum. The city will have to borrow money to build the museum and will own $1000 per year in interest. Each citizen's marginal benefit is listed in the table below. Citizen Anita Brandon Carlena Dallas Eloise Marginal benefit from museum ($/year) 340 290 240 190 140 a. Assuming each citizen voted based on their own private interests, would they vote to increase taxes by $200 per person per year to build the museum? b. If instead a private company built the museum and charged people a yearly fee to attend the museum, would any company offer to build it? Explain. c. Comparing the cost to the social marginal benefit, would it be more efficient to build the museum or not?

The town of Smallsville is considering building a museum. The city will have to borrow money to build the museum and will own $1000 per year in interest. Each citizen's marginal benefit is listed in the table below. Citizen Anita Brandon Carlena Dallas Eloise Marginal benefit from museum ($/year) 340 290 240 190 140 a. Assuming each citizen voted based on their own private interests, would they vote to increase taxes by $200 per person per year to build the museum? b. If instead a private company built the museum and charged people a yearly fee to attend the museum, would any company offer to build it? Explain. c. Comparing the cost to the social marginal benefit, would it be more efficient to build the museum or not?

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter17: Externalities And The Environment

Section: Chapter Questions

Problem 2.3P: (Negative Externalities) Suppose you wish to reduce a negative externality by imposing a tax on the...

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Question

7. The town of Smallsville is considering building a museum.
The city will have to borrow money to build the museum and
will own $1000 per year in interest. Each citizen's marginal
benefit is listed in the table below.
Citizen
Anita
Brandon
Carlena
Dallas
Eloise
Marginal benefit from museum ($/year)
340
290
240
190
140
a. Assuming each citizen voted based on their own private
interests, would they vote to increase taxes by $200 per
person per year to build the museum?
b. If instead a private company built the museum and
charged people a yearly fee to attend the museum, would
any company offer to build it? Explain.
c. Comparing the cost to the social marginal benefit, would
it be more efficient to build the museum or not?

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