Consider the example in the table below of three homeowners residing on the banks of a lake. Assume that the lake was cleaned up to the socially efficient level and that the total costs of the cleanup were shared equally among the homeowners (stick to integer values here):Part I.Will all three homeowners be better off? (you have to calculate on your own)All are better offA and B are better off, but C is not B and C are better off but not APart II.What problems does this bring up about sharing the costs of public goods?Society can be made better off but only on the expense of certain groupsSociety should not even invest in the cleaning of the lake on the first placeSociety can never recover public good costs

Table 1: Marginal willingness to pay ($ per year) Contaminant level Homeowner A Homeowner…

Answered: Consider the example in the table below…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter2: Economics: Eight Powerful Ideas

Section: Chapter Questions

Problem 19P

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Consider the example in the table below of three homeowners residing on the banks of a lake. Assume that the lake was cleaned up to the socially efficient level and that the total costs of the cleanup were shared equally among the homeowners (stick to integer values here):

Part I.

Will all three homeowners be better off? (you have to calculate on your own)

All are better off
A and B are better off, but C is not
B and C are better off but not A

Part II.

What problems does this bring up about sharing the costs of public goods?

Society can be made better off but only on the expense of certain groups
Society should not even invest in the cleaning of the lake on the first place
Society can never recover public good costs

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