In the same mechanism, suppose citizen 's valuation rises to (citizen 's stays ) and the procedure is unchanged. Then
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2 marks, −0.666666666666667MicroeconomicsMarket failure, externalities and public goodsFree riding and preference revelationModerateabout 3 min
DSE 2015 Question 28: Market failure, externalities and public goods
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In the same mechanism, suppose citizen 1 's valuation rises to 50 (citizen 2 's stays 60) and the procedure is unchanged. Then (A) the park will be built and result in a government budget surplus of Rs 10 (B) the park will be built and result in a government budget deficit of Rs 10 (C) the park will be built and result in a balanced budget (D) the park will not be built
Market failure, externalities and public goods has come up 114 times in 7 exams since 2006.
What this question tests
This question is on Free riding and preference revelation, part of Market failure, externalities and public goods in Microeconomics.
Why people understate their value for public goods, and mechanisms that elicit the truth.
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