UT ECO 321 - Problem Set 3_Ch 9 to 12 (3 pages)

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Problem Set 3_Ch 9 to 12



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Problem Set 3_Ch 9 to 12

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Pages:
3
School:
University of Texas at Austin
Course:
Eco 321 - Public Economics

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Economics 321 Public Economics Prof Marika Cabral TA Katherine Keisler Fall 2017 UT Austin Problem Set 3 due Mon October 23 1 Ch 9 In a recent study Americans stated that they were willing to pay 70 billion to protect all endangered species and also stated that they were willing to pay 15 billion to protect a single species Which problem with Lindahl pricing does this demonstrate Explain 2 Ch 9 Alfie Bill and Coco each value police protection differently Alfie s demand for the public good is Q 60 5P Bill s demand is Q 80 4P and Coco s demand is Q 100 10P If the marginal cost of providing police protection is 12 5 what is the socially optimal level of police provision Under Lindahl pricing what share of the tax burden would each of the three people pay 3 Ch 9 Carrboro has three equal sized groups of people 1 type A people consistently prefer more police protection to less 2 type B people prefer high levels of police protection to low levels and they prefer low levels to medium levels 3 type C people prefer medium levels to low levels which they in turn prefer by a modest amount to high levels a Which types of people have single peaked preferences Which have multipeaked preferences b Will majority voting generate consistent outcomes in this case Why or why not 4 Ch 10 The identical citizens of Boomtown have 3 million to spend either on park maintenance or private goods Each unit of park maintenance costs 10 000 a Graph Boomtown s budget constraint b Suppose that Boomtown chooses to purchase 150 units of park maintenance Draw the town s indifference curve for this choice c Now suppose that the state government decides to subsidize Boomtown s purchase of park maintenance by providing the town with 1 unit of maintenance for every 2 units the town purchases Draw the new budget constraint Will Boomtown purchase more or fewer units of park maintenance Will Boomtown purchase more or fewer units of the private good Illustrate your answer and explain 5 Ch 10 Think about two public goods public schools and food assistance for needy families Consider the implications of the Tiebout model Which of the goods is more efficiently provided locally Which is more efficiently provided centrally Explain 6 Ch 10 The state of Delaland has two types of town Type A towns are well to do and type B towns are much poorer Being wealthier type A towns have more resources to spend on education their demand curve for education is Q 100 3P where P is the price of a unit of education Type B towns have a demand curve for education that is given by Q 100 6P a If the cost of a unit of education is 10 per unit how many units of education will the two types of town demand b In light of the large discrepancies in educational quality across



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