Table 11-1
Consider the town of Anywhere with only three residents, Mary, Bill, and Tricia. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of the park.

-Refer to Table 11-1.Suppose the cost to build the park is $33 per acre and that the residents have agreed to split the cost of building the park equally.To maximize his own surplus,how many acres would Bill like Anywhere to build?
A) 0 acres
B) 1 acre
C) 2 acres
D) 3 acres

Question

Table 11-1
Consider the town of Anywhere with only three residents, Mary, Bill, and Tricia. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of the park.
 
-Refer to Table 11-1.Suppose the cost to build the park is $33 per acre and that the residents have agreed to split the cost of building the park equally.To maximize his own surplus,how many acres would Bill like Anywhere to build?
A) 0 acres 
B) 1 acre 
C) 2 acres 
D) 3 acres

Quizplus · Accepted Answer

To maximize his own surplus, Bill would want to pay for the park only up to the point where his willingness to pay equals the cost per acre, which is $33 according to the question. This means that Bill would be willing to pay for the park up to 3 acres, since his willingness to pay is greater than $33 for the first 3 acres.

However, since the cost of building the park would be split equally among the three residents, Bill would end up paying for 1 acre more than he would want to. Therefore, to maximize his own surplus, Bill would prefer Anywhere to build only 2 acres of the public park. This way, Bill would pay $66 towards the cost of the park, and get to enjoy 2 acres of it, which is more than he would have been willing to pay for.

Table 11-1 Consider the Town of Anywhere with Only Three Residents, Mary