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.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 3PA: Greater consumption of alcohol leads to more motor vehicle accidents and, thus, imposes costs on...

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