Luis, Mina, and Daniel All Would Like a Play Area

question 39

Multiple Choice

Luis, Mina, and Daniel all would like a play area while waiting at their children's bus stop. The neighborhood association is considering installing playground equipment at the bus stop. Luis values the equipment at $150, Mina at $100, and Daniel at $100. The equipment and labor for installation cost $300. If Luis, Mina, and Daniel are the only residents who value the equipment, what should the neighborhood association do?

• A)Install the playground equipment because people would like a play area.
• B)Do not install the playground equipment because the costs outweigh the benefits.
• C)Install the playground equipment because the benefits outweigh the costs.
• D)Do not install the playground equipment to prevent the Tragedy of the Commons problem of overuse.

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Definitions:

Capital at Risk

The amount of capital that could be lost in an investment due to risk factors.

Company's Liabilities

Financial obligations a company owes to outside parties, including debts, loans, and other forms of financial liabilities.

Efficient Market

A market in which prices fully reflect all available information and assets are priced accurately.

Moral Hazard

The situation where one party takes risks because they know they will not bear the full consequences of their actions, often due to asymmetric information or contracts.