A public good that would benefit Karen,Tammy,and Max has a one time installation cost of $900.These three voters must approve any tax plan by simple majority and all three will cast a vote. $$\begin{array} { | c | c | c | }
\hline \text { VOTER } & \text { RESERVATION PRICE } & \text { INCOME } \
\hline \text { Kris } & \$ 100 & \$ 1000 \
\hline \text { Taylor } & \$ 200 & \$ 5000 \
\hline \text { Max } & \$ 700 & \$ 6000 \
\hline
\end{array}$$
Suppose the government proposes a proportional income tax of 8%.The result of the referendum will be that

Question

A public good that would benefit Karen,Tammy,and Max has a one time installation cost of $900.These three voters must approve any tax plan by simple majority and all three will cast a vote. $$\begin{array} { | c | c | c | } 
\hline \text { VOTER } & \text { RESERVATION PRICE } & \text { INCOME } \
\hline \text { Kris } & \$ 100 & \$ 1000 \
\hline \text { Taylor } & \$ 200 & \$ 5000 \
\hline \text { Max } & \$ 700 & \$ 6000 \
\hline
\end{array}$$
Suppose the government proposes a proportional income tax of 8%.The result of the referendum will be that

Quizplus · Accepted Answer

First, let's calculate how much each of these voters would pay in taxes with a proportional income tax of 8%: - Kris: \$1000 (income) x 0.08 = \$80 (tax) - Taylor: \$5000 (income) x 0.08 = \$400 (tax) - Max: \$6000 (income) x 0.08 = \$480 (tax) Now, let's see if each voter's reservation price for the public good is greater than the amount they would pay in taxes: - Kris: Reservation price (\$100) > Tax paid (\$80) => Kris will vote FOR the tax. - Taylor: Reservation price (\$200) < Tax paid (\$400) => Taylor will vote AGAINST the tax. - Max: Reservation price (\$700) < Tax paid (\$480) => Max will vote AGAINST the tax. So the result of the referendum will be that Kris and Max will vote FOR the tax, Taylor will vote AGAINST it. Therefore, the correct answer is C.

A Public Good That Would Benefit Karen,Tammy,and Max Has a One