Lane and Riley Are the Only Two Residents in a Neighborhood,and

question 3

Multiple Choice

Lane and Riley are the only two residents in a neighborhood,and they share the same driveway.They would like to have the driveway paved.The value of the paved driveway is $1500 to Lane and $1000 to Riley.Irrespective of who pays for the paving both people will benefit from it.
Suppose the cost of paving the driveway is $2000,it is _____ for them to share its cost,because then they will have a total economic _______.

• A)inefficient;shortage of $500
• B)efficient;surplus of $500
• C)efficient;shortage of $500
• D)efficient;surplus of $1000

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Definitions:

Price Discrimination

A pricing strategy where identical or substantially similar goods or services are sold at different prices by the same provider to different consumers.

Demand Elasticity

An assessment of the sensitivity of demand for a product to shifts in its price.

Monopolist Engages

Refers to actions taken by a monopolistic firm to maintain or enhance its market power, which can include setting prices or limiting supply.

Price Discrimination

The strategy of selling the same product to different customers at different prices based on their willingness to pay.