Table 11-2
Consider a small town with only three families, the Johnson family, the Marshall family, and the Walker family. The town does not currently have any streetlights so it is very dark at night. The three families are considering putting in streetlights on Main Street and are trying to determine how many lights to install. The table below shows each family's willingness to pay for each streetlight.

-Refer to Table 11-2.Suppose the cost to install each streetlight is $450 and the families have agreed to split the cost of the streetlights equally.If the families vote to determine the number of streetlights to install,basing their decision solely on their own willingness to pay (and trying to maximize their own surplus),what is the greatest number of streetlights for which the majority of families would vote "yes?"
A) 1 streetlight
B) 2 streetlights
C) 3 streetlights
D) 4 streetlights

Question

Table 11-2
Consider a small town with only three families, the Johnson family, the Marshall family, and the Walker family. The town does not currently have any streetlights so it is very dark at night. The three families are considering putting in streetlights on Main Street and are trying to determine how many lights to install. The table below shows each family's willingness to pay for each streetlight.
 
-Refer to Table 11-2.Suppose the cost to install each streetlight is $450 and the families have agreed to split the cost of the streetlights equally.If the families vote to determine the number of streetlights to install,basing their decision solely on their own willingness to pay (and trying to maximize their own surplus),what is the greatest number of streetlights for which the majority of families would vote "yes?"
A) 1 streetlight 
B) 2 streetlights 
C) 3 streetlights 
D) 4 streetlights

Quizplus · Accepted Answer

To determine the maximum number of streetlights for which the majority of families would vote "yes," we need to find the point at which the marginal willingness to pay for the last streetlight equals the cost of installing it. We can see from the table that the Johnson family is only willing to pay $400 for the first streetlight, so they would not vote "yes" for a second one. The Marshall family is willing to pay up to $700 for the first streetlight and up to $300 for a second one, so they would vote "yes" for up to 2 streetlights. The Walker family is willing to pay up to $900 for the first streetlight, up to $600 for a second one, and up to $100 for a third one, so they would vote "yes" for up to 3 streetlights. Therefore, the maximum number of streetlights for which the majority of families would vote "yes" is 2.

Table 11-2 Consider a Small Town with Only Three Families, the Johnson