2. The Partytown school district has long been controlled by the same political group, the INS. There is little chance
Posted: Thu Apr 28, 2022 12:32 pm
2. The Partytown school district has long been controlled
by the same political group, the INS. There is little chance
of political competition in the near future. Thus Partyville
is governed by a monopoly model of fiscal choice. The head of
the school board, Mr. Big, is eager to maximize the school district
budget. However, the school budget, if larger than the state
minimum must be approved in a vote by the residents. If a
proposed budget fails, the state minimum is the reversion
amount.
In Partytown all residents have the following MB curve for
school quality units:
MB = 500 – 10 * Q
All residents face a tax price of $100 per quality
unit.
a. What is the efficient level of quality units in the Partytown
school district?
b. The state minimum requires Q to be at least 20. What is
the MB of residents at this level of Q?
c. Relative to the efficient point what is the welfare loss
residents would experience at the state minimum?
d. Given Mr. Big’s preference to maximize the school budget,
what Q level will he propose and why?
by the same political group, the INS. There is little chance
of political competition in the near future. Thus Partyville
is governed by a monopoly model of fiscal choice. The head of
the school board, Mr. Big, is eager to maximize the school district
budget. However, the school budget, if larger than the state
minimum must be approved in a vote by the residents. If a
proposed budget fails, the state minimum is the reversion
amount.
In Partytown all residents have the following MB curve for
school quality units:
MB = 500 – 10 * Q
All residents face a tax price of $100 per quality
unit.
a. What is the efficient level of quality units in the Partytown
school district?
b. The state minimum requires Q to be at least 20. What is
the MB of residents at this level of Q?
c. Relative to the efficient point what is the welfare loss
residents would experience at the state minimum?
d. Given Mr. Big’s preference to maximize the school budget,
what Q level will he propose and why?