Assume That Abby, Ben, and Clara Are the Only Citizens

question 53

Multiple Choice

Assume that Abby, Ben, and Clara are the only citizens in a community. A proposed public good has a total cost of $1,000. All three citizens will share an equal portion of this cost in taxes. The benefit of the public good is $400 each to Abby, Ben, and Clara. In a majority vote, this proposal will most likely be

• A)accepted; the public good is produced, even though it is economically inefficient.
• B)defeated; the public good is not produced, even though it would have been efficient to do so.
• C)accepted; the public good is produced, which is economically efficient.
• D)defeated; the public good is not produced, which is the proper outcome.

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Definitions:

Marginal Expenditure

The additional cost incurred from purchasing one more unit of a good or service.

Average Expenditure

Average expenditure is the amount of money spent per unit of goods or services purchased, calculated by dividing total expenditure by the total number of units bought.

Competitive Quantity

is the quantity of goods produced or services offered based on the equilibrium in a competitive market.

Wage Rate

The fixed amount of compensation or payment received by an employee from an employer in exchange for work performed.