1. A seven person society, with members P1 through P7, intends to select a policy among four alternatives, A, B, C, and D. The preference orderings of the seven people are as follows (listed in descending order of desirability): P1 and P2: ACBD P3 and P4: BACD P5: DBAC P6: DABC P7: DCBA

a. [1 point] If the seven members decide to use majority-rule voting to pick the winning policy, is there a Condorcet winner? If so, which alternative is the winner and why? [Hint: A Condorcet winner beats all others in a pair-wise contest.] b. [Harder, 2 points] (i) Suppose that the society adopts a majority-rule voting, and an agenda whereby C and D are voted upon, and then the winner is paired against B, and them this winner is paired against A. Which alternative wins if everyone voted sincerely? How does this relate to part (a)? (ii) Which wins if everyone votes sincerely except P6, who votes strategically? What specifically should P6 do to be strategic here? 2. [2 points] Suppose that Colorado is considering two alternative methods of funding local road construction, matching grants and block grants. In the case of the matching grant, Colorado will spend $1 for every $1 spent by localities. a. What is the price of an additional dollar of local spending (from the perspective of the local community) in each case? b. Which of the two methods do you think would lead to higher levels of local spending on roads? Explain your answer. 3. [3 points] Consider two metropolitan areas, one that has many small school districts and one that has only a few large school districts. How are the efficiency and equity effects of introducing a voucher system likely to differ across these two areas? Relate your answer to the Tiebout mechanism (and define it and its assumptions fully in your answer). [Hint: You should have discussion about (1) efficiency in response to vouchers, (2) equity in response to vouchers, (3) the Tiebout model and its assumptions as they relate to vouchers.]