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There are two types of residents in the Maine cities of Kittery and York, wealthy retirees and middle-class retail workers. Both Kittery and York provide
There are two types of residents in the Maine cities of Kittery and York, wealthy retirees and middle-class retail workers. Both Kittery and York provide snow plowing services for their citizens. Wealthy retirees have trouble driving on snowy roads, so they value snow plowing services more than middle-class retail workers. The value that wealthy retirees receive from snow plowing services is: UW(S) = 2050,5 + 85 The value that middle-class retail workers receive from snow plowing services is: U(S) = 4050.5 + 55, where S is the number of snowplows that the city owns and operates. The per-resident cost of snow plowing services is 10S. Assume that each city has 100 residents, and they are distributed as shown in this table: Wealthy Middle-class Kittery 70 30 York 30 70 a. (4 points) Determine how many snowplows wealthy retirees prefer and how many snowplows middle-class retail works prefer. b. (4 points) If each city uses majority voting to determine how many snowplows to own and operate, how many will each city provide and how large of a lump-sum tax will they charge? Now assume that wealthy retirees and middle-class retail workers can migrate between Kittery and York. C. (2 points) Which residents will choose to move? What will the equilibrium distribution of residents be? d. (4 points) Why does the Tiebout Model solve the problems with preference revelation that are present with Lindahl pricing
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