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In Metro, there are three types of houses: E (expensive), M (medium), and C (cheap). Each household prefers the same spending on public education. Schools are initially financed with the property tax based on market value, and initially there are three school districts. Suppose the property tax is replaced by a square-foot tax (for example, $2 per square foot of living space per year). The equilibrium number of school districts will decrease to one if. . . because. . . .
Chapter 8, Problem 1(choose chapter or problem)
Property Tax versus Square-Foot Tax
In Metro, there are three types of houses: E (expensive), M (medium), and C (cheap). Each household prefers the same spending on public education. Schools are initially financed with the property tax based on market value, and initially there are three school districts. Suppose the property tax is replaced by a square-foot tax (for example, $2 per square foot of living space per year). The equilibrium number of school districts will decrease to one if. . . because. . . .
Questions & Answers
QUESTION:
Property Tax versus Square-Foot Tax
In Metro, there are three types of houses: E (expensive), M (medium), and C (cheap). Each household prefers the same spending on public education. Schools are initially financed with the property tax based on market value, and initially there are three school districts. Suppose the property tax is replaced by a square-foot tax (for example, $2 per square foot of living space per year). The equilibrium number of school districts will decrease to one if. . . because. . . .
ANSWER:Step 1 of 2
Given data:
In Metro, there are three types of houses: E (expensive), M (medium), and C (cheap). Each household prefers the same spending on public education. Schools are initially financed with the property tax based on market value, and initially there are three school districts. Suppose the property tax is replaced by a square-foot tax (for example, $2 per square foot of living space per year).
The equilibrium number of school districts will decrease to one if. . . because. . . .