Scenario 11.1: Mariana has decided that she would like to build a private electric railway that would directly connect her small town to her favorite casino 75 miles away. She discovers that to build her railway, she will need to purchase an equal amount of land from 5 ranchers: Abe, Ben, Cat, Don, and Eve. Mariana believes that the revenue she would receive from running the railroad would be enough to cover all of her construction costs and leave her $3 million to buy the land. Mariana calculates the land she needs to build the railway will cost her $2 million.
-Refer to Scenario 11.1. Suppose all five ranchers know that Mariana has $3 million to spend on their land and they also know that their land that Mariana needs is worth a total of $2 million. If all five ranchers got together and decided to sell the land to Mariana, what is the maximum amount that each rancher should ask to be paid for his or her land?
A) $400,000
B) $600,000
C) $750,000
D) $1 million

Question

Quizplus · Accepted Answer

If the ranchers know Mariana has $3 million to spend, they can collectively ask for up to that amount. Dividing $3 million equally among the 5 ranchers gives each rancher $600,000.