Assume that Matt, Joe, and Teresa 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 $380 for Matt, $360 for Joe, and $200 for Teresa. 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.

Question

Quizplus · Accepted Answer

The total benefit ($940) is less than the total cost ($1,000), making the proposal economically inefficient. However, since Matt and Joe together receive benefits exceeding their individual costs (each pays $333.33, but Matt gets $380 and Joe gets $360), they are likely to vote in favor, leading to the proposal's acceptance despite its inefficiency.

Assume That Matt, Joe, and Teresa Are the Only Citizens