Problem 4. 20 Points Suppose there are 1,000 voters in Stony Brook. A total of 4

Question

Problem 4. 20 Points Suppose there are 1,000 voters in Stony Brook. A total of 400 are willing to pay up to $25 each for the construction of a Park, whereas the other 600 are willing to pay only S10. The construction of the Park will cost $12,000. Someone proposes a vote on whether to tax each citizen $12 in order to finance the Park. (a) What will be the result according to the median voter model? Is this result socially efficient? Explain (b) What if instead of beign willing to pay up to $25 each, the 400 residents are willing to pay up to S50 each?

Explanation / Answer

a) What will be the result according to the median voter model?Is this result socially efficient?Explain.

Ans:- Out of the 1000 voters 400 voters are willing to pay upto $25 and 600 are williing to $10 . so The median voters willing to pay is $10 and more than $10 will not pass for the proposal of the park.

Total Willingness to pay of all voters = 400*$25 + 600*10= $16000

Construction of the park cost = $12000  

$16000>$12000 means its exceed the cost of the park. Actually Social efficient osutcome is to construct the park . According to the analysis median voter outcome socially inefficient.

b) What if instead of being willing to pay up to $25 each, the 400 residents are willing to pay up to $50 each?

Ans:- If 400 residents are willing to pay $50 each instead of $25 each but the median voter are willing to pay $10 . So if the median voters willing to pay change then answer would be change otherwise not.

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