Micro Economics

Corporate Finance
October 29, 2020
Corporate Finance
October 29, 2020

John and Dave value national defense differently. John’s demand for the public good is

 

for questions 1 and 2 can you please show each step of the math, so I can make sure I have it right. Thank you.

 

1. John and Dave value national defense differently. John’s demand for the public good is: P = 50 – .20Q. Dave’s demand for the public good is 30 – .30Q. The marginal cost of providing national defense is $40. What is the socially optimal level of national defense? Calculate the share of the tax burden for both John and Dave (in percentage terms) for national defense based on Lindahl pricing? Finally, let’s assume that Republicans value national defense much more than Democrats (I realize this is a gross generalization). Based on this assumption (and not knowing anything else about John and Dave) who is a Republican and who is a Democrat? Explain

 

 

 

Mike, Bill and Ed have different preference levels for their support for military spending on overseas operations. Mike is a hawk and his preferences are ranked in order: high spending, medium spending, low spending. Bill is a moderate and his preferences are ranked in order: medium spending, low spending, high spending. Ed is a pragmatist. His preference is for limited spending but if we have to engage he believes we should go “all in” and thus his preferences are ranked in order: low spending, high spending, medium spending. Explain in detail how this voting situation would not lead to political equilibrium (hint: show the rounds of voting as was detailed in class). Explain what the implications are for government decision-making in this decision context.

 

 

 

3. Think about two public goods- public schools and food assistance for needy families. consider the implications of the tieabout model. which of the goods is more efficiently provided locally? explain

 

 

 

4. as described in the text (gruber 3rd edition) Fischel (1989) argued that California's Serrano vs. Priest school finance equalization induced voters to limit property taxes in California. Following this argument, would an alternative school finance equalization that produced increased spending for low-wealth communities using state funds be more, less or equally likely to induce a property tax limitation in California? Explain

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