Citizens of Tinytown Are Considering Building a New Park

question 71

Multiple Choice

Citizens of Tinytown are considering building a new park. If each voter in Tinytown has a reservation price that is less than the total cost of the park, then:

• A)the benefit of the park is less than the cost of the park, so the park should not be built.
• B)some sort of collective action by voters will be necessary to fund the park.
• C)a private firm will have an incentive to build the park.
• D)the park will never be built.

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Definitions:

Variable Costs

Expenses that change in proportion to the activity of a business, such as the cost of raw materials or production volume.

Total Revenue

The amount of money generated from sales of goods or services before any expenses are subtracted.

Variable Costs

Costs that change in proportion to the level of production or sales activities of a business.

Fixed Costs

Business expenses that remain constant regardless of the level of goods or services produced.