A business improvement district is considering the installation of a new lighting system for the district. If the lighting system is installed, all the businesses in the area will benefit, and there will be no way in which a business that does not pay for a share of the system can be denied full benefits from the system. The system will cost $4,000 and will benefit the five members of the district as follows.

Individual Benefit (in $) Cost Share (in $)

A. $1500 $800

B. $1500 $800

C. $700 $800

D $600 $800

E. $600 $800

1) Is the project economically feasible?

2) Would any individual business be willing to install the lighting system (and pay for it) by itself?

3) Would the project be approved by a majority of the businesses at a referendum?

4) Does the project as currently structured meet the Pareto criterion?

5) If possible, revise the cost shares to allow the project to meet the Pareto criterion and to pass a referendum?