Suppose there are two types of households. Each type A household's willingness to pay for the local public good, z, is 100-z. Each type B household's willingness to pay for the local publicgood is 150 - 2z. There are two equally sized communities (Westand East), and the cost per unit of the local public good is $2,000. a) Suppose West has 40 type A households and 10 type B households, and East has 10 type A households and 40 type B households. With a per household tax, find the level of local public good provision under majority voting in each community. b) How would consumer surplus change for each type ofhousehold with Tiebout sorting? Calculate the change in consumer surplus for each type of household.

Suppose there are two types of households. Each type A household's willingness to pay for the local public good, z, is 100-z. Each type B household's willingness to pay for the local publicgood is 150 - 2z. There are two equally sized communities (Westand East), and the cost per unit of the local public good is $2,000. a) Suppose West has 40 type A households and 10 type B households, and East has 10 type A households and 40 type B households. With a per household tax, find the level of local public good provision under majority voting in each community. b) How would consumer surplus change for each type ofhousehold with Tiebout sorting? Calculate the change in consumer surplus for each type of household.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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