Question

Suppose North Side neighborhood of Franburg is in need of a playground where neighborhood kids can play. There are 1,000 residents in North Side neighborhood. They each have $5 value for the playground. The cost to build the playground is $3,000. The best approach for the neighborhood to build the playground at the minimum (and equal) financial burden to its residents is to in the amount of $ Then each resident's consumer surplus from the playground would be $ Check

Answer 1

Playground cost = $3000

Residents = 1000

Value to each consumer = $5

The best approach for the neighborhood to build the ground at the minimum financial burden is $3000 at $3 each to every resident. It would give consumer surplus of $2 ($5 - $3) to each resident as the value of playground to resident is $5 and they have to pay $3.