Are the following statements true or false? a) “If the assumptions of the median

Question

Are the following statements true or false?

a) “If the assumptions of the median voter model hold, then using majority voting to determine the amount of a public good purchased by a city will lead to either an efficient level of the public good being provided or an under-provision of the public good. It cannot lead to an over-provision of the public good.”

b) A prominent senator has calculated the total social benefit of the currant amount of space exploration at $3 billion per year. The total social cost of space exploration is currently only $2 billion. The senator argues that there would be a net gain to society by increasing the amount of space exploration until total costs rise enough to equal total benefits. Is the senator correct?

Explanation / Answer

a.

Correct Answer:

False

Majority voting can chose any of the options. Though, as per the assumptions of median voter model, preferences shown by the voters will be single peaked.

b.

False, senator is not correct.

Senator should analyze marginal social benefit and marginal social cost.

Maximum efficiency can only be achieved when marginal social benefit becomes equal to marginal social cost.

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