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 $1500 to Lane and $1000 to Riley.Irrespective of who pays for the paving both people will benefit from it.
What is the most a contractor can charge for paving the driveway and still be hired by at least one of them?

Question

Quizplus · Accepted Answer

Since both Lane and Riley will benefit from the paved driveway, they will be willing to split the cost of the paving as long as it does not exceed the total value of the benefit they will receive. The contractor can charge a maximum of $2500 for the paving job, which is the sum of the values of the benefit to each person ($1500 + $1000). If the contractor charges more than $2500, neither Lane nor Riley will be willing to hire the contractor since they would be paying more than the total benefit they would receive. Therefore, the most the contractor can charge and still be hired by at least one of them is $1500 (the value of the benefit to Lane). However, this assumes that Lane is willing to pay for the entire cost of the paving, which may not be the case. Therefore, the best choice is B, $1500, since it is the most conservative and reasonable option.

Lane and Riley Are the Only Two Residents in a Neighborhood,and