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Chapter 05 Appendix

McConnell Brue Flynn 20e

APPENDIX DISCUSSION QUESTIONS

1. Explain how affirmative and negative majority votes can sometimes lead to inefficient

allocations of resources to public goods. Is this problem likely to be greater under a benefits‐

received or an ability‐to‐pay tax system? Use the information in Figures 1a and 1b to show how

society might be better off if Adams were allowed to buy votes. LO3

Answer: The problem arises because the one-person one-vote rule does not allow

voters to register the strength of their preferences. In the text’s example, three

people—Adams, Benson, and Conrad—have preferences with regard to the

On the other hand, suppose the program was worth $100 to Adams, but $350 each

to Benson and Conrad for a total benefit of $800. In this case the program would

The problem is likely to be greater under an ability-to-pay system. Under a

benefits-received scheme, the users of the public goods are the ones who will pay

for it. If they perceive that the benefit exceeds the cost, they will vote for it.

In Figure 1a, we can see that society would be better off if Adams had been

allowed to pay enough to Benson to get Benson’s “yes” vote. Benson should be

In Figure 1b, Adams could pay $75 to Benson again to vote “no.” Now Adams

incurs only $75 cost rather than the $200 cost differential between his cost and

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2. “Majority voting ensures that government will produce only those public goods for which

benefits exceed costs.” Why? LO3

Answer: A number of government failures and voting paradoxes can lead to

3. “The problem with our democratic institutions is that they don’t correctly reflect the will of the

people! If the people-rather than self-interested politicians or lobbyists-had control, we wouldn’t

have to worry about government taking actions that don’t maximize allocative and productive

efficiency.” Critique. LO3

Answer: Due to voter failure and the problem that economically inefficient policies are

APPENDIX REVIEW QUESTIONS

1. Explain the paradox of voting through reference to the accompanying table, which shows the

ranking of three public goods by voters Jay, Dave, and Conan: LO3

Answer: The paradox is that majority voting does not always provide a clear and

consistent picture of the public’s preferences. Here the courthouse is preferred to the

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2. Suppose there are only five people in a society and each favors one of the five highway

construction options listed in Table 4.4 (“No new construction” is one of the five options).

Explain which of these highway options will be selected using a majority paired‐choice vote. Will

this option be the optimal size of the project from an economic perspective? LO3

Answer: Project B (New 2-lane highway wins) using a paired-choice vote. There

is no “paradox of voting” problem here and B is the preference of the median

3. True or False. The median voter model explains why politicians so often stake out

fringe

positions that appeal only to a small segment of the electorate. Why? LO3

Answer: False

The median voter model does NOT explain why politicians so often stake out fringe

The motivation for politicians to appeal to the median voter and advocate moderate

Her attempt to capture the support of the median voter will also tend to draw in a lot of

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APPENDIX PROBLEMS

1. Look back at Figures 1a and 1b, which show the costs and benefits to voters Adams, Benson,

and Conrad of two different public goods that the government will produce if a majority of

Adams, Benson, and Conrad support them. Suppose that Adams, Benson, and Conrad have

decided to have one single vote at which the funding for both of those public goods will be

decided simultaneously. LO3

a. Given the $300 cost per person of each public good, what are Adams’ net benefits for each

public good individually and for the two combined? Will he want to vote yes or no on the

proposal to fund both projects simultaneously?

b. What are Conrad’s net benefits for each public good individually and for the two combined?

Will he want to vote yes or no on the proposal to fund both projects simultaneously?

c. What are Benson’s net benefits for each public good individually and for the two combined?

Will he want to vote yes or no on the proposal to fund both projects simultaneously-or will he

be indifferent?

d. Who is the median voter here? Who will the two other voters be attempting to persuade?

Answer:

a. Adams’ net benefit for the good in 5.1a is $400 (=$700 of benefit minus $300 of cost). His

net benefit for the public good in 5.1b is -$200 (=$100 of benefit minus $300 of cost). Thus,

b. Conrad’s net benefit for the public good in 5.1a is -$100 (=$200 of benefit minus $300 of

c. Benson’s net benefit for the public good in 5.1a is -$50 (=$250 of benefit minus $300 of

d. Benson is the median voter whose preference is “in the middle” and whose vote will decide

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2. Political advertising is often directed at winning over so-called swing voters, whose votes

might go either way. Suppose that two political parties-the Freedom Party and the Liberty Party-

disagree on whether to build a new road. Polling shows that of 1,000 total voters, 450 are firmly

for the new road and 450 are firmly against the new road. Thus, each party will try to win over a

majority of the 100 remaining swing voters. LO3

a. Suppose that each party spends $5,000 on untargeted TV, radio, and newspaper ads that are

equally likely to reach any and all voters. How much per voter will be spent by both parties

combined?

b. Suppose that, instead, each party could direct all of its spending towards just the swing voters

by using targeted ads that exploit Internet social media. If all of the two parties’ combined

spending was targeted at just swing voters, how much would be spent per swing voter?

c. Suppose that only the Freedom Party know how to target voters using social media. How

much per swing voter will it be spending? If at the same time the Liberty Party is still using

only untargeted TV, radio, and newspaper ads, what portion of its total spending is likely to

be reaching the 100 swing voters? How much per swing voter does that portion amount to?

d. Looking at your answers to part c, how much more per swing voter will the Freedom Party be

spending than the Liberty Party? If spending per swing voter influences elections, which

party is more likely to win?

Answer:

a. The two parties combined will spend $10,000 (=$5,000+$5,000). That amounts to

b. If all advertising could be targeted at just the swing voters, the parties would spend

c. Thanks to knowing how to target just swing voters, the Freedom Party will spend $50

d. The Freedom Party will be spending about $45 more per swing voter (=$50 per

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