A local contractor hires $5000 of unskilled labour at the minimum wage and constructs a children’s adventure playground, on otherwise vacant land, for which it is paid $7500 by the local council. The cost of materials, in addition to current supply, required to construct the facility was $1500, including $100 in federal sales tax (a distortionary tax), and the firm paid an extra $100 in federal company tax as a result of undertaking the project. (All values are present values.) The council is to charge a fee to users of the playground, and the present value of the fees to be paid by consumers is estimated to be $3000. A survey indicates that consumers’ total willingness to pay for the use of the facility (including the fee) has a present value of $5500. The labour employed to construct the facility would otherwise be unemployed, receives no unemployment benefit, and the present value of its non-market activity is estimated to be $2000.

i Calculate the net benefit of the project to each of the following members of the Referent Group:

a the contractor b consumers c labour d the council e the federal government.

ii ii. Calculate the efficiency net benefit of the project.