1. The following data depict the fiscal characteristics of two school districts in a metropolitan area, each composed of identical single family houses with one pupil per house. The voters who have chosen to live in both districts desire and select $10,000 of educational spending per pupil and collect property taxes to finance it. Because B has small (low value) houses, the tax rate in B is much higher than in A. a. Would a voter in district B prefer to live in a big ($200,000) house in district A? Why? (2 points) b. Suppose that there is a third school district to choose from with an equal number of big and small houses so that the average per pupil value is $150,000. What tax rate is required in this district to spend $10,000 per pupil? If small houses also cost $100,000 in this district, are consumers of small houses better off here or in B? If big houses also cost $200,000 in this district, are consumers of big houses better off here or in A? (2 points) c. Given your answers to part c, what do you expect will happen to the demand for big and small houses in this third district? What will happen to the prices of these houses in this mixed district? (2 points) School District A $200,000 $ 50 $ 10,000 Characteristic Per Pupil Property Value Property Tax Rate (in dollars per $1,000 of value) Per Pupil Expenditure School District B $100,000 $ 100 $ 10,000
1. The following data depict the fiscal characteristics of two school districts in a metropolitan area, each composed of identical single family houses with one pupil per house. The voters who have chosen to live in both districts desire and select $10,000 of educational spending per pupil and collect property taxes to finance it. Because B has small (low value) houses, the tax rate in B is much higher than in A. a. Would a voter in district B prefer to live in a big ($200,000) house in district A? Why? (2 points) b. Suppose that there is a third school district to choose from with an equal number of big and small houses so that the average per pupil value is $150,000. What tax rate is required in this district to spend $10,000 per pupil? If small houses also cost $100,000 in this district, are consumers of small houses better off here or in B? If big houses also cost $200,000 in this district, are consumers of big houses better off here or in A? (2 points) c. Given your answers to part c, what do you expect will happen to the demand for big and small houses in this third district? What will happen to the prices of these houses in this mixed district? (2 points) School District A $200,000 $ 50 $ 10,000 Characteristic Per Pupil Property Value Property Tax Rate (in dollars per $1,000 of value) Per Pupil Expenditure School District B $100,000 $ 100 $ 10,000
Chapter13: General Equilibrium And Welfare
Section: Chapter Questions
Problem 13.8P
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Transcribed Image Text:= Chegg
Depict The Fiscal Characteristics Of
Two School Districts In A...
1. The following data depict the fiscal characteristics of two school districts in a
metropolitan area, each composed of identical single family houses with
pupil per
house. The voters who have chosen to live in both districts desire and select $10,000 of
educational spending per pupil and collect property taxes to finance it. Because B has
small (low value) houses, the tax rate in B is much higher than in A.
a. Would a voter in district B prefer to live in a big ($200,000) house in district A?
Why? (2 points)
b.
Suppose that there is a third school district to choose from with an equal number
of big and small houses so that the average per pupil value is $150,000. What tax
rate is required in this district to spend $10,000 per pupil? If small houses also
cost $100,000 in this district, are consumers of small houses better off here or in
B? If big houses also cost $200,000 in this district, are consumers of big houses
better off here or in A? (2 points)
c. Given your answers to part c, what do you expect will happen to the demand for
big and small houses in this third district? What will happen to the prices of these
houses in this mixed district? (2 points)
School District A
$200,000
$
50
$10,000
Characteristic
Per Pupil Property Value
Property Tax Rate (in
dollars per $1,000 of value)
Per Pupil Expenditure
School District B
$100,000
$
100
$10,000
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