Lindahl Equilibrium: An Example

A city wants to build a public pool, a public good. The marginal cost to build the pool is $200 per sq meter. The residents of the city are willing to pay $1000 for the first sq meter and $0 for the 250th sq meter. Thus, the city should build a 200-sq meter pool and levy a tax according to how much each resident is willing to pay.

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