Suppose There Are Ten People Playing Cards in a Room

question 17

Multiple Choice

Suppose there are ten people playing cards in a room.One of them wants to smoke a cigar;nine of them dislike the smell of cigar smoke.The smoker values the privilege of smoking at $5,and each of the other nine occupants of the room would be willing to pay fifty cents for clean air in the room.The rules governing use of the room state that smoking is not allowed unless everyone agrees to allow smoking.
Refer to the information given above.What is the total economic surplus if the cigar smoker refrains from smoking?

• A)-$4.50
• B)-$.50
• C)$4.50
• D)$9.50

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Definitions:

Earnings Per Share

A measure of a company's profitability calculated by dividing its net income by the number of its outstanding shares.

Stock Splits

An action by a company to divide its existing shares into multiple ones to boost the stock's liquidity, though the company's overall market value stays the same.

Earnings Per Share

A company's net profit divided by the number of its outstanding shares, indicating the amount of money each share would receive if all profits were distributed.

Share Repurchases

The act of a company buying back its own shares from the marketplace, which can increase the value of remaining shares.