Denise is thinking about setting up a butterfly garden in her backyard. She estimates that it will cost her $2,000 to purchase and install special plants and an irrigation system to attract butterflies. The benefit she expects to receive is $1,800. In addition, neighbor Billy will receive a benefit of $150 and neighbor Sammy will receive a benefit of $100. Fromthis, we can conclude that
A) butterflies are a negative externality for Billy and Sammy
B) Denise will set up the butterfly garden without any help from her free-rider neighbors
C) if Sammy refuses to contribute to the butterfly garden, he will be unable to enjoy its benefits if it is built
D) if Billy refuses to contribute to the butterfly garden, Denise will not have one
E) if Billy and Sammy contribute the amounts at which they value the butterfly garden, Denise will set it up. Otherwise, no garden.

Question

Quizplus · Accepted Answer

The total benefit of the butterfly garden ($1,800 to Denise, $150 to Billy, and $100 to Sammy) exceeds the cost ($2,000), making it a worthwhile investment if all parties contribute according to the value they receive. This does not imply that Denise will set it up without contributions (B), nor does it suggest that neighbors can be excluded from enjoying the benefits if they don't contribute (C), making E the correct choice.

Denise Is Thinking About Setting Up a Butterfly Garden in Her