Two towns, each with three residents, are decidingwhether to put on a fireworks display to celebrate theNew Year. Fireworks cost $360. In each town, somepeople enjoy fireworks more than others.a. In the town of Bayport, each of the residentsvalues the public good as follows:Frank $50Joe $100Callie $300Would fireworks pass a cost–benefit analysis?Explain.b. The mayor of Bayport proposes to decide bymajority rule and, if the fireworks referendumpasses, to split the cost equally among allresidents. Who would vote in favor, and whowould vote against? Would the vote yield thesame answer as the cost–benefit analysis?c. In the town of River Heights, each of the residentsvalues the public good as follows:Nancy $20Bess $140Ned $160Would fireworks pass a cost–benefit analysis?Explain.d. The mayor of River Heights also proposes todecide by majority rule and, if the fireworksreferendum passes, to split the cost equallyamong all residents. Who would vote in favor,and who would vote against? Would the voteyield the same answer as the cost–benefitanalysis?e. What do you think these examples say about theoptimal provision of public goods?
Two towns, each with three residents, are deciding
whether to put on a fireworks display to celebrate the
New Year. Fireworks cost $360. In each town, some
people enjoy fireworks more than others.
a. In the town of Bayport, each of the residents
values the public good as follows:
Frank $50
Joe $100
Callie $300
Would fireworks pass a cost–benefit analysis?
Explain.
b. The mayor of Bayport proposes to decide by
majority rule and, if the fireworks referendum
passes, to split the cost equally among all
residents. Who would vote in favor, and who
would vote against? Would the vote yield the
same answer as the cost–benefit analysis?
c. In the town of River Heights, each of the residents
values the public good as follows:
Nancy $20
Bess $140
Ned $160
Would fireworks pass a cost–benefit analysis?
Explain.
d. The mayor of River Heights also proposes to
decide by majority rule and, if the fireworks
referendum passes, to split the cost equally
among all residents. Who would vote in favor,
and who would vote against? Would the vote
yield the same answer as the cost–benefit
analysis?
e. What do you think these examples say about the
optimal provision of public goods?
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