Suppose that we have 3 consumers. The government considers building a road. It costs $80. The consumers value it at: $20$40, and $50. Should the government build the road ? A.Consumer surplus is larger than the cost so it is profitable to build the road, but before deciding to build we should check we cannot build something with even higher value to consumers which costs the $80 or less (so we properly consider opportunity costs as well as consumer surplus) B.No governments should not build roads, cities should do that. C.Yes, consumer surplus is larger than the cost. Which one?
Suppose that we have 3 consumers. The government considers building a road. It costs $80. The consumers value it at: $20$40, and $50. Should the government build the road ? A.Consumer surplus is larger than the cost so it is profitable to build the road, but before deciding to build we should check we cannot build something with even higher value to consumers which costs the $80 or less (so we properly consider opportunity costs as well as consumer surplus) B.No governments should not build roads, cities should do that. C.Yes, consumer surplus is larger than the cost. Which one?
Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter12: The Design Of The Tax System
Section12.2: Taxes And Efficiency
Problem 2QQ
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Suppose that we have 3 consumers. The government considers building a road. It costs $80. The consumers value it at: $20$40, and $50. Should the government build the road ?
A.Consumer surplus is larger than the cost so it is profitable to build the road, but before deciding to build we should check we cannot build something with even higher value to consumers which costs the $80 or less (so we properly consider opportunity costs as well as consumer surplus)
B.No governments should not build roads, cities should do that.
C.Yes, consumer surplus is larger than the cost.
Which one?
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