Question
Suppose there are types of households.Each type A household's willingness to pay for the local public good z, is 100-z.Each type B household's willingness to
Suppose there are types of households.Each type A household's willingness to pay for the local public good z, is 100-z.Each type B household's willingness to pay for the local public good is 150-2z.There are two equally sized communities (West and East), and the cost per unit of the local public good is $2000.
a) Suppose West has 40 type A households and 10 type B households, and East has 10 type A households and 40 type B households.With a per household tax, find the level of local public good provision under majority voting in each comminity.
b) How would consumer surplus change for each type of household with Tiebout sorting?Calculate the change in consumer surplus for each type of household.
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