Public Finance Question: Venus is a private community in which the founder pays

Question

Public Finance Question:

Venus is a private community in which the founder pays for all the public goods, there being no payments by the residents or landowners. Jupiter is a private community in which the public goods are paid from assessments based on land value. People are mobile between the two communities. If all else is equal, then a worker in Venus who rents his house is

a) no more better off in Venus than in Jupiter, because his rent payment will rise to the level where his net benefits are equal to those in Jupiter.

b) better off in Venus, because it has no taxes at all.

c) undetermined; theory cannot tell us where he would be better off or if it is equal.d) worse off in Venus, because rent will rise by more than the public goods

d) undetermined; theory cannot tell us where he would be better off or if it is equal.

Explanation / Answer

C. Undetermined, theory cannot tell us where he would be better off.

There is no information about tax or other benefits in Jupiter. Therefore we cannot compare rent payements and benefits in Jupiter.

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