Consider a village with 10 inhabitants. The cost of public lighting in the village is $70 a month. The willingness to pay of the 10 inhabitants for public lighting is described in the following table:
Suppose that, in order to fund public lighting, the village council imposes a tax of $7 on each inhabitant.
Which of the following statement is true?
the answer is:
The (total) consumer surplus of the 10 inhabitants is lower when public lighting is provided and funded through the tax, than when public lighting is not provided and no-one has to pay the tax.
can someone explain why?