Consider the example of the three homeowners around the lake (the ones depicted in Table 4.2). Suppose the lake was cleaned up to the efficient level and that the total costs of the cleanup were shared equally among the homeowners (stick to integer values here). Will all three homeowners be better off? What problems does this bring up about sharing the costs of public goods?

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TABLE 4.2 Individual and Aggregate Demand for Lowering Lake Pollution Marginal Willingness to Pay ($ per year) Level of Contaminant (ppm) 43 NO 2 1 0 Home- owner A 110 85 70 55 45 Home- owner B 60 35 10 0 0 Home- owner C 30 20 15 10 5 Aggregate MWP 200 140 95 65 50 Marginal Cost of Cleanup 50 65 95 150 240 TABLE 4.2 Individual and Aggregate Demand for Lowering Lake Pollution Marginal Willingness to Pay ($ per year) Level of Contaminant (ppm) 43 NO 2 1 0 Home- owner A 110 85 70 55 45 Home- owner B 60 35 10 0 0 Home- owner C 30 20 15 10 5 Aggregate MWP 200 140 95 65 50 Marginal Cost of Cleanup 50 65 95 150 240

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Marginal willingness to pay for and marginal cost of abatement of lake pollution The individual and ... View the full answer