1. The city of Rocketville has 9 citizens with income ranging from $1 to 59 with one citizen at each integer value. The marginal private benefit of rockets in a fireworks display is MB = Income - # Rockets/9. The marginal cost of a rocket is $18 and rockets are financed with a head tax (the same tax for each citizen in Rocketville).

What is the efficient outcome? Illustrate on a graph.

Under majority rule what is the outcome? Illustrate on a graph.

M8229-1/a

g.

Suppose the income of the lowest income increase from $1 to $4. How does this change the A efficient outcome? How does this change the majority rule outcome? Increase, decrease or not change.