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Distribution of benefits and costs

The Parliament, the legislature of the fictional country of Verben, is considering legislation that will generate benefits of $15 million and costs of $11 million. For perspective, Verben's population is 60 million.

Passing the legislation is EFFICIENT / INEFFICIENT, and if everyone in Verben shares equally in both its benefits and its costs, the Parliament will vote FOR / AGAINST the legislation.

If the costs of the legislation are concentrated among a few people instead of widespread among the population, those who benefit will be willing to spend up to $26 MILLION / $11 MILLION / $15 MILLION / $4 MILLION / $0 MILLION lobbying the Parliament against the legislation. (Note: Assume that the benefits are widespread; therefore, you can ignore them in the calculations of the few who experience the costs.)

The less widely spread are the benefits of the legislation, the HIGHER /LOWER is the likelihood of lobbying for the legislation by those who will incur its benefits.

Suppose that, as before, the costs of the legislation are concentrated among a small group, the benefits are very widespread, and the Parliament is responsive to lobbying. The likely amount spent on lobbying for the legislation is $26 MILLION / $11 MILLION / $15 MILLION / $4 MILLION / $0 MILLION, in which case the Parliament will likely vote AGAINST / FOR the legislation.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M91918471

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