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4 Chec Jack and Jill are the only two residents in a neighborhood, and they would like to hire a security guard. The value of
4 Chec Jack and Jill are the only two residents in a neighborhood, and they would like to hire a security guard. The value of a security guard is $50 per month to Jack and $150 per month to Jill. The competitive wage for a security guard is $120 per month, and irrespective of who pays the guard, the guard will protect the entire neighborhood. Furthermore, suppose Jack earns $1,000 per month and Jill earns 2 $11,000 per month. ints a. What proportional tax on income would just cover the cost of the security guard and be accepted by majority vote? The proportional tax rate would be 1% eBook b. Suppose instead that Jack proposes a tax scheme under which Jack and Jill would each receive the same net benefit from hiring the guard. How much would Jack and Jill pay now? Would Jill agree to this scheme? Print Jack would pay $ Jill would pay $ References Jill would agree to this scheme. c. What is the practical problem that prevents ideas like the one in part b from working in real-life situations? O People with a low perceived benefit will pay a smaller share of the total cost, making these people feel inferior to those who pay more. O The socially efficient outcome is always for all involved parties to pay the exact same share of the total cost O Uneven distributions of wealth will mean that some of the involved parties are willing to pay more, which is unfair to those with higher incomes. Each party involved has an incentive to understate his or her benefit in order to pay less of the total cost
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