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 ______.

Answer 1

efficient, $400 of surplus

Step-by-step explanation:

Data given

Value of paved driveway to Lane = $1,500

Value of paved driveway to Riley = $900

And, the cost of paved driveway is $2,000

Since as we can see that the benefit is exceeded than the cost which reflect the efficiency

And, the economic surplus is

= $1,500 + $900 - $2,000

= $2,400 - $2,000

= $400