Denise Is Thinking About Setting Up a Butterfly Garden in Her

question 124

Multiple Choice

Denise is thinking about setting up a butterfly garden in her backyard. She estimates that it will cost her $2,000 to purchase and install special plants and an irrigation system to attract butterflies. The benefit she expects to receive is $1,800. In addition, neighbor Billy will receive a benefit of $150 and neighbor Sammy will receive a benefit of $100. From this, we can conclude that:

• A) butterflies are a negative externality for Billy and Sammy.
• B) Denise will set up the butterfly garden without any help from her free-rider neighbors.
• C) if Sammy refuses to contribute to the butterfly garden, he will be unable to enjoy its benefits if it is built.
• D) if Billy refuses to contribute to the butterfly garden, Denise will not have one.
• E) if Billy and Sammy contribute the amounts at which they value the butterfly garden, Denise will set it up.

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Definitions:

Issued Shares

Shares that have been allocated to shareholders by a company, representing ownership in the company.

Net Assets

Net assets represent the total assets of a company minus its total liabilities, indicating the actual value of a company’s equity held by shareholders.

Acquisition

The process by which one company takes over another company either by purchasing its assets or its stock.

Goodwill

An intangible asset representing the excess of acquisition cost over the fair value of identifiable net assets acquired in a business combination.