Three people own homes situated around a aggregate marginal willingness' to pay to lower lake pollution are provided in the table bel the lake is cleaned up to the efficient level and the total clean-up costs are shared equally am the homeowners, will all three homeowners be better off and would a majority vote decide favour of cleaning up the lake? What in the officient level of pollution in parts per million (ppm) and why? l olean-un costs are
Three people own homes situated around a aggregate marginal willingness' to pay to lower lake pollution are provided in the table bel the lake is cleaned up to the efficient level and the total clean-up costs are shared equally am the homeowners, will all three homeowners be better off and would a majority vote decide favour of cleaning up the lake? What in the officient level of pollution in parts per million (ppm) and why? l olean-un costs are
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:22.
Three people own homes situated around a polluted lake. Their individual and
aggregate marginal willingness' to pay to lower lake pollution are provided in the table below. If
the lake is cleaned up to the efficient level and the total clean-up costs are shared equally among
the homeowners, will all three homeowners be better off and would a majority vote decide in
favour of cleaning up the lake?
a.
b.
C.
What is the efficient level of pollution in parts per million (ppm) and why?
If the lake is cleaned up to the efficient level and the total clean-up costs are shared
equally among the homeowners, will all three homeowners be better off? Explain why or why
not. (Hint: First calculate the amount of the fee that would be charged each homeowner.)
Should be lake be cleaned up to the efficient level? If the decision to clean-up the lake
were to be taken by majority vote, would the clean-up be undertaken?
Level of
Contaminant
(ppm)
4
3
2
1
0
Marginal WTP ($)
Owner B
Owner A
81
72
63
48
27
45
30
9
0
0
Owner C
42
24
18
12
3
Aggregate
Marginal
WTP ($)
150
120
90
60
30
Marginal
cleanup cost
($)
90
120
150
180
210
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