The city council pays $42,000 to an interstate firm to construct a barbequearea with a kid’s playground on otherwise vacant land. The firm hires…

The city council pays $42,000 to an interstate firm to construct a barbequearea with a kid’s playground on otherwise vacant land. The firm hires $22,000 ofunskilled labour at the minimum wage. The cost of materials used (which are in addition to current supply) to construct the facility was $4,000, including $800 in federal sales tax(a distortionary tax). Depreciation on the firm’s capital equipment was $1,200 andinterest on pre-existing debt during construction was $1,500. The firm paid an extra $2,000 in federal company tax as a result of undertaking the project. The council is to charge a fee to users of the barbecue area, with a present value of $20,000. A survey to local residents indicates that non-market value of the facility has a positive benefit to families with a present value of $30,000 however with pollution effects of $2,000. In the absence of the barbecue project the labour employed to construct the facility would otherwise be unemployed and would receive from the federal government unemployment benefits totalling $2,000. The value of the non-market activity of the labour is estimated to be 20% of the market wage. All stakeholders except the interstate firm are part of the Referent Group.
i. Calculate the aggregate net benefit of the project according to:
b. the Private CBA
c. the Efficiency CBA
d. the Referent Group CBA
ii. Calculate the distribution of the Referent Group net benefits among the following
(a) consumers
(c) the council
(d) the federal government;

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