A public good that would benefit Karen,Tammy,and Max has a one-time installation cost of $900.These three voters must approve any tax plan by a simple majority and all three will cast a vote.
-Refer to the information above.Suppose that the government accurately knows the three reservation prices and the cost of the public good.To achieve the ideal tax structure and collect no more in tax revenue than $900,each voter should be charged __________ of their __________.

Question

A public good that would benefit Karen,Tammy,and Max has a one-time installation cost of $900.These three voters must approve any tax plan by a simple majority and all three will cast a vote. 
-Refer to the information above.Suppose that the government accurately knows the three reservation prices and the cost of the public good.To achieve the ideal tax structure and collect no more in tax revenue than $900,each voter should be charged __________ of their __________.

Quizplus · Accepted Answer

The cost of the public good is $900, which is the maximum amount of tax that can be collected. To achieve the ideal tax structure and collect no more in tax revenue than $900, each voter must be charged their reservation price. Let R1, R2, and R3 be the reservation prices of Karen, Tammy, and Max respectively. If each voter is charged their reservation price, the total tax collected will be R1 + R2 + R3. To ensure that the total tax collected is $900, we need to set R1 + R2 + R3 = $900. Since all three voters must approve the tax plan, each voter's vote carries equal weight. Therefore, each voter should be charged an equal fraction of their reservation price, which is 90%. Thus, the correct answer is D.

A Public Good That Would Benefit Karen,Tammy,and Max Has a One-Time