Question

Alex, Becky, and Clancy are the only voters in a small society and are considering whether to publicly finance a project. Indicate in the following table what each individual’s vote would be and whether the public project will be funded. Name Marginal Cost Marginal Benefit Vote Alex $100 $108 Becky $100 $12 Clancy $100 $125 Total $300 $245 If this same project were taking place in the private sector, a firm fund the project. In private markets, decisions to provide goods or services to the market are generally made if marginal benefits marginal costs. In comparison, the decisions to provide goods and services by governments are made through . As a result, governments may approve projects whose costs their benefits.

Answer 1

Name	Marginal Cost	Marginal Benefit	Net Benefit
Alex	$100	$108	$108 - $100 = $8
Becky	$100	$12	$12 - $100 = -$88
Clancy	$100	$125	$125 - $100 = $25
Total	$300	$245	$245 - $300 = -$55

A pubic is good is funded when the net benefit of the public good is positive. Individuals contribute the funding of the good when Marginal benefit is greater than the marginal cost.

The project will not be funded by the market contributors as the sum total of benefits are lower than the marginal cost of project. Alex and Clancy have positive net benefit and may be willing to pay for the project. But Becky has negative net benefit from the project so he will not contribute for the project.