Assign9 - James E. Pesando Economics 100 Assignment #9 The...

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James E. Pesando Economics 100 Assignment #9 The Role of Government; The Measurement of National Income 1. The cost of a fireworks display is $7,000. There are 10,000 individuals in a town, who each would derive a benefit equal to $1 from watching the fireworks display. Cost = $7000Benefit= 10000 x $1 = $10000 TB>TC (by $3000) Public: 1)Non-excludable; 2)Non-rival [free rider problem: due to the non-excludability of the display] (a) Would a private entrepreneur be able to produce the fireworks display? Explain why or why not. Free rider problem due to the non-excludability of the display, therefore the private entrepreneur will not provide it. (b) Should the government of the town provide the fireworks display, by levying an appropriate tax on each individual? Because TB>TC, the government should provide it. (From 70cents to 1 dollar) (c) How would your answer to (B) change if each individual in the town would derive a benefit of $0.5 from the fireworks display? Benefit= 10000 x $0.5 = $5000. TB<TC, therefore the government should
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This note was uploaded on 03/02/2010 for the course ECO ECO100 taught by Professor Inheart during the Spring '09 term at University of Toronto- Toronto.

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Assign9 - James E. Pesando Economics 100 Assignment #9 The...

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