Question 10.

eesee d rmacies in avily regu- t could be an almost [Philipsen this chap- lobbyists and lawyers to make their case in Congress. How does this change your esti- mate of the deadweight loss associated with this rent-seeking activity? 10. Consider a society with three people (John, Eleanor, and Abigail) who use majority rule to decide how much money to spend on schools. There are three options for spending on a pub- lic park: H (high), M (medium), and L (low). These individuals rank the three options in the following way: hand to Ik is given e price per d per year. rice of 2. mpetitive, Ik and the Rank John Eleanor Abigail H 1 M t L 2 L MH M 3 H HM L cians, the I maintain perates in hat is the s of milk 1 revenue - Q/5. ve shows ach level de cartel? the car- Limp-sum ant poli- tribution at is the a. Consider all possible pairwise elections: M versus H, H versus L, and L versus M. What is the outcome of each election? Does it ap- pear, in this case, that majority rule would lead to a stable outcome on spending on the public park? If so, what is that choice? Would giving one person the ability to set the agenda affect the outcome? Explain. b. Now suppose that Eleanor's preference order- ing changed to the following: first choice = L, second choice H, and third choice = M. Would majority rule lead to a stable outcome? If so, what is that choice? Would giving one person the ability to set the agenda affect the outcome? Explain. contribu- mers hire