Please show all calculations. The city of Nashville is considering cleaning up p

Question

Please show all calculations. The city of Nashville is considering cleaning up pollution. The cost of the cleanup is estimated at $3 million. Nashville has 100,000 residents. 30% of the residents are willing to pay $10 each for the cleanup. The rest of the population is wealthier and are willing to pay $20 each. A city councillor proposes that the cleanup be financed by charging everyone in the community a tax of $20.

a) Is this project desirable from the point of view of the Pareto criterion? Explain.

b) Is the project desirable from the point of view of the Kaldor-Hicks criterion?Explain

c) Do your answers to (a) & (b) change if the wealthier population were willing to pay $25 each. Explain.

Thank you!!

Explanation / Answer

Ans

A No because it reduces welfare of poor because they have to pay 20 instead of 10

B no because rich can't compensate poor and still be left with anything(20-10-10=0)

C answer to A doesn't change. Answer to B does change since wealthier people will be left with 5 even after compensating poor. (25-10-10=5)

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