ECONOMICS W/CONNECT+20 >C<
20th Edition
ISBN: 9781259714993
Author: McConnell
Publisher: MCG CUSTOM
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Chapter 5.A, Problem 1ADQ
To determine
Affirmative and negative majority votes and inefficient allocation of resources.
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Explain how affirmative and negative majority votes can sometimes lead to inefficient allocations of resources to public goods. Is this problem likely to be greater under a benefits-received or under an ability-to-pay tax system? Use the information in Figures 17.1a and 17.1b to show how society might be better off if Adams were allowed to buy votes.
1. A city has three equal-sized groups of people: (1) Type A people consistently prefer more public school expenditure; (2) Type B people prefer high levels of public school expenditure to low levels, and they prefer low levels to medium levels; (3) Type C people most prefer medium levels to low levels, and they prefer low levels to high levels.
Will majority voting generate consistent outcomes in this case? (Hint: you should check if there are cycles in outcomes by changing the order of voting)
A.True
B. False
2. Suppose Florida government has asked you to design and evaluate the effectiveness of an education voucher program. What is wrong with simply comparing the educational performance of those receiving vouchers with those who do not receive vouchers? Explain.
2. In this problem, you will compare the level of a public good chosen under majority voting to the socially-optimal level under three different sets of circumstances. Suppose first that individual i's demand curve for z is given by αi/z, where αi is a positive parameter. Instead of being linear, this demand curve is a hyperbola. Suppose further that z costs $1 per unit to produce (c = 1) and that this cost is shared equally among consumers. Therefore, cost per person is 1/n per unit of z. Then consider the three sets of circumstances listed below. Each situation has a different number of consumers in the economy and different collections of α values for the consumers. The number of consumers is denoted n and the vector of α values is denoted A = (α1,α2,...,αn-1,αn). Case 1: n = 7, A = (4, 2, 12, 4, 5, 13, 8). Case 2: n = 5, A = (10, 6, 11, 14, 8). Case 3: n = 9, A = (6, 9, 10, 4.5, 12, 7, 13.5, 8, 11). Using this information, do the following:
a)For each case, compute the preferred z…
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