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Benefits of Social Programs

A community-based public works project costing $55,000 will benefit 5 separate individuals as shown below:

Individual #, Benefit ($), Cost Share ($)

1$1,000 $1,500

2 $5,000 $4,500
3 $4,000 $5,000
4 $20,000 $18,000
5 $25,000 $25,500

In an Excel spreadsheet, show whether this project is economically feasible. Would a majority approve this project (explain)? Does the project meet Pareto efficiency criterion (explain)? Revise the cost shares to meet Pareto criterion and get the referendum passed by a majority vote.

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Solution Preview

See excel attached.

source: http://www.princeton.edu/~achaney/tmve/wiki100k/docs/Pareto_efficiency.html

1. The overall benefit is $500 which is not a great ...

Solution Summary

A sentence explains each and an excel chart shows the initial benefits vs. cost and then the optimized one.