Question

John, Jack, and James are neighbors and each of themhas children. They are keen to have a playground in thevacant land adjacent to their house. The playground withsimple facilities, such as a swing and a see-saw, requires$6,000 to build. The playground is worth $5,000 to John.$2,500 to Jack, and $1,500 to James.

a. Is it efficient to build the playground?

Answer 1

To determine whether it is efficient to build the playground, we need to compare the total value of the playground to the total cost of building it.

The total value of the playground is the sum of the values it holds for each neighbor:

Value for John: $5,000

Value for Jack: $2,500

Value for James: $1,500

Total value of the playground = $5,000 + $2,500 + $1,500 = $9,000

The cost of building the playground is given as $6,000.

Since the total value of the playground ($9,000) is greater than the cost of building it ($6,000), it is considered efficient to build the playground. The value it provides to the neighbors exceeds the cost required to construct it.