According to the benefit principle of taxation

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Abe, Betty and Charlie are the only three students in my graduate Public Finance class and I am trying to determine how many office hours to hold per week for this class. Since my office and blackboard are reasonably large, all three can attend the hours I provide and simultaneously consume all the "wisdom" I offer during those hours. That is, there is no rivalry in the consumption of my attention and time during office hours. However, not every student values these hours the same. Suppose, in fact, that the marginal benefit each student receives is as follows: MBAbe = 10 - (1/3)H; MBBetty = 12 - (1/3)H; MBCharlie = 14 - (1/3)H.ASSUME that the marginal cost of my time per hour is constant and equal to $24 per hour. a) How many office hours should I hold per week if, like any good Public Finance professor, I want to offer the Pareto efficient number of office hours? b) Suppose office hours don't come with tuition so I charge Abe, Betty and Charlie according to what they would pay in a Lindahl equilibrium, that is, according to the benefit principle of taxation. What would I charge each student per hour for the total number of office hours I provide? Would the cost of my time per hour be covered? How much money in total would the students pay? (Assume each student must pay for ALL the hours I provide whether they attend or not.)

Reference no: EM13854701

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