Homework Clinic
Social Science Clinic => Economics => Macroeconomics => Topic started by: ninaj on Nov 23, 2022
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Provision of Public Goods
A three-person city is considering a fireworks display. Anya is willing to pay $125 for the display, Vladimir is willing to pay $35, and Aleksandr is willing to pay $25. The cost of the display is $183. Will any single citizen provide the display on his or her own? If the cost of the display is evenly divided between the citizens, will a majority vote be in favor of the display?
◦ yes, yes
◦ no, yes
◦ no, no
◦ yes, no
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no, no
Because the cost of the display ($183) is greater than the price each person is willing to pay for the display (Anya: $125, Vladimir: $35, and Aleksandr: $25), no person would provide the display on his or her own.
If the cost of the display is evenly divided between the citizens, the cost per person = 183/3 = $61.
If put to a vote, each person will vote for the cost if their willingness to pay is greater than or equal to the cost per person.
Anya: $125 is greater than $61, so she will vote yes
Vladimir: $35 is less than $61, so he will vote no
Aleksandr: $25 is less than $61, so he will vote no
Therefore, a majority vote will not be in favor of the fireworks display.