Lane and Riley are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1,500 to Lane and $900 to Riley. Regardless of who pays for the paving both people will benefit from it.
If the cost of paving the driveway is $2,000, then it is ________ for the driveway to be paved because total economic surplus would ________.

Question

Lane and Riley are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1,500 to Lane and $900 to Riley. Regardless of who pays for the paving both people will benefit from it.  
If the cost of paving the driveway is $2,000, then it is ________ for the driveway to be paved because total economic surplus would ________.

Quizplus · Accepted Answer

The combined value of the paved driveway is $2,400, and its cost is only $2,000. Thus, paving the driveway is efficient since total economic surplus would increase by $400.

Lane and Riley Are the Only Two Residents in a Neighborhood