Suppose that Steve and Susie each perceive $200 of marginal benefit from a proposed new park, whereas Elizabeth perceives $800. If the proposed tax levied on each for the park would be $300, a majority vote will

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The project will be defeated because the tax ($300) is higher than the marginal benefit perceived by Steve and Susie ($200 each), and they are likely to vote against it. Since only Elizabeth perceives a higher benefit ($800), the majority (Steve and Susie) will vote against the project, leading to its defeat. However, because the total benefit ($1200) exceeds the total cost ($900), not proceeding with the project means resources will be underallocated to it.

Suppose That Steve and Susie Each Perceive $200 of Marginal