Question

You are the mayor of a town with 20,000 residents. Your economic development agency recently conducted a survey in which the 20,000 residents said that a small public library in the center of town would be worth $40 to each of them. The cost to build the library is $500,000. Which of the following is the most efficient option?
A. The library should be built and paid for with voluntary donations collected from residents, as these donations should more than cover the cost of the library.
B. The library should be built and paid for by the town government and paid for with a tax on the residents because all residents would benefit from it but some residents would not donate if they were asked.
C. The library should be built and paid for by the wealthiest ten percent of the residents
D. The library should not be built.

Answer 1

Answer:

b

Explanation:

The total benefit from building the library = 20.000 x $40 = $800,000

The total benefits exceeds the cost of building the library, so the library should be built.

Since all the residents would benefit from the library, all the residents should pay for the library. Thus, all residents should be taxed .