2.

Suppose three neighbors must vote on installation of a traffic light that costs $210. All

three will share the cost of the light - that is, each person will contribute $70 to the

installation. Leona values the light at $50; Lionel values the light at $50; and Theo, who

drives the most, values the light at $200.

a)

Explain why the traffic light is a public good.

b)

Is it efficient for the traffic light to be installed? Why or why not?

c)

Suppose a majority rule vote is held to determine whether the light should be

installed. Will the light be installed? Explain any differences between this result

and your answer in part (b).