Kris, Taylor and Max Are the Only Three Residents in a Neighborhood

question 102

Multiple Choice

Kris, Taylor and Max are the only three residents in a neighborhood. A public good that would benefit all of them has a one-time installation cost of $900. The value of the public good to each resident is shown in the table below. Any tax plan must be approved by simple majority. $$\begin{array} { | c | c | c | } \hline \text { Resident } & \text { Reservation Price } & \text { Income } \\\hline \text { Kris } & \$ 100 & \$ 1,000 \\\hline \text { Taylor } & \$ 200 & \$ 5,000 \\\hline \text { Max } & \$ 700 & \$ 6,000 \\\hline\end{array}$$ Suppose that the government knows each resident's reservation price. To collect no more than $900 in tax revenue, each resident should be charged ______ percent of their ______.

• A)100; reservation price
• B)70; reservation price
• C)20; income
• D)90; reservation price

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Definitions:

High Price

The condition of a good or service being sold at a relatively elevated value compared to its perceived worth or compared to others in the market.

Sequential Game

A strategic scenario in game theory where players make decisions one after another, with each decision affecting subsequent choices.

Shopkeeper

An individual who owns, operates, or manages a retail store, selling goods to the public.

High Price

A situation where the cost of a good or service is considerably above the average or expected price.