Suppose 100 Townspeople Value a Statue of the Local Hero

question 60

Multiple Choice

Suppose 100 townspeople value a statue of the local hero at $1 each, and construction of the statue would cost $90. Which of the following is TRUE?

• A) It would be efficient to build the statue, but it may not be built because some of the townspeople who value the statue will not contribute to its construction.
• B) It would be efficient to build the statue and it will be built because at least ninety of the townspeople will contribute to its construction.
• C) The statue will not be built because it is not efficient to build a statue that costs $90 if the townspeople value it at only $1.
• D) The statue will not be built because the local government does not have the power to tax only those who value it.

---

Definitions:

Monthly Fixed Expenses

Regular expenses that do not vary in amount and are paid on a monthly basis.

Contribution Margin Ratio

The proportion of sales revenue that exceeds variable costs, typically expressed as a percentage, indicating how much contributes to covering fixed costs and generating profits.

Fixed Expenses

Costs that do not vary with the level of production or sales over a short period, such as rent, salaries, and insurance.

Break-Even

The point at which total costs and total revenues are equal, meaning there is no net loss or gain.