Answer the question on the basis of this table showing the marginal benefit a particular public project will provide to each of the three members of a community.No vote trading is allowed. If the tax cost of this proposed project is $600 per person, a majority vote will:

Question

Answer the question on the basis of this table showing the marginal benefit a particular public project will provide to each of the three members of a community.No vote trading is allowed.  If the tax cost of this proposed project is $600 per person, a majority vote will:

Quizplus · Accepted Answer

The table shows that Member 1 has a marginal benefit of $1000, Member 2 has a marginal benefit of $800 and Member 3 has a marginal benefit of $500. If the tax cost of the project is $600 per person, then the total cost of the project would be $1800 (i.e. $600 x 3).

If we add up the marginal benefits of the three members, we get a total marginal benefit of $2300. This is greater than the total cost of the project, so the project passes the cost-benefit test.

However, since the benefit to Member 1 is much greater than the benefit to the other two members, it is possible that Member 1 may be willing to pay more for the project than the other members. This means that there is a potential for vote trading, which is not allowed in this scenario.

Given that vote trading is not allowed, the project will still pass because the total marginal benefit is greater than the total cost. However, since Member 1's marginal benefit is so much higher than the other members, there is a risk of overallocation of resources to the project. Therefore, the best choice is C, which indicates that resources will be overallocated to the project.

Answer the Question on the Basis of This Table Showing