Kris, Taylor and Max are the only three residents in a neighborhood. A public good that would benefit all of them has a one-time installation cost of $900. The value of the public good to each resident is shown in the table below. Any tax plan must be approved by simple majority.
$$\begin{array} { | c | c | c | }
\hline { \text { Resident } } & \text { Reservatim Price } & \text { Incame } \
\hline \text { Kris } & \$ 100 & \$ 1,000 \
\hline \text { Taylor } & \$ 200 & \$ 5,000 \
\hline \text { Max } & \$ 700 & \$ 6,000 \
\hline
\end{array}$$
Installing the public good would ________ total economic surplus by ________.

Question

Kris, Taylor and Max are the only three residents in a neighborhood. A public good that would benefit all of them has a one-time installation cost of $900. The value of the public good to each resident is shown in the table below. Any tax plan must be approved by simple majority.  
$$\begin{array} { | c | c | c | } 
\hline { \text { Resident } } & \text { Reservatim Price } & \text { Incame } \
\hline \text { Kris } & \$ 100 & \$ 1,000 \
\hline \text { Taylor } & \$ 200 & \$ 5,000 \
\hline \text { Max } & \$ 700 & \$ 6,000 \
\hline
\end{array}$$  
Installing the public good would ________ total economic surplus by ________.

Quizplus · Accepted Answer

Explanation: The total economic surplus is calculated by summing the reservation prices of all residents ($100 + $200 + $700 = $1000) and subtracting the cost of the public good ($900). This results in an increase in total economic surplus by $100 ($1000 - $900 = $100).

Kris, Taylor and Max Are the Only Three Residents in a Neighborhood