The average cost of landscaping services for members of a condominium community is $350 per week. Assume that the quantity of landscaping services is perfectly correlated with the number of gardeners per week. Suppose the community consists of seven resix dents, each with the identical marginal benefit curve for landscaping services. The marginal benefit of the first gardener is $100 per resident.
a. How many gardeners would be hired if their services were sold in a market to individual buyers at a price of $350 per week? Explain why the market arrangement is inefficient.
b. Assume that the efficient number of gardeners is three per week. What is the political equilibrium under majority rule if each voter is assigned a tax share of $50 per gardener per week? Does the political equilibrium under majority rule differ from the Lindahl equilibrium?

  • CreatedAugust 22, 2015
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