In an effort to maintain privacy and enhance property values, three home owners, Deidre, Eugene and Farhad, are considering leasing a portion of adjoining vacant land for a private park. Table 5-1 shows each person's willingness to pay for each quantity of the land.
a. Complete the column in Table 5-1
b. Graph the marginal social benefit curve.
c. Suppose the landowner is willing to lease a portion of her land according to the following supply schedule given in Table 5-2. On the same diagram, graph the supply curve.
d. What is the optimal quantity of land that homeowners should lease? Explain your answer.
e. Explain why a park of 5 acres is not optimal.
Definitions:
Process Cost System
A method of accounting used in manufacturing where costs are assigned to products based on the processes they undergo.
Fringe Benefits
Additional compensations given to employees beyond their regular salary or wages, such as health insurance, retirement plans, or company cars.
Factory Labor
The workforce involved in the manufacturing process, whose wages are considered direct costs to the production of goods.
Job Order Cost System
An accounting system that accumulates costs by individual jobs, used in industries where goods are produced to customer specifications.
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