Table 11-1 Consider the Town of Springfield with Only Three Residents, Sophia

question 295

Multiple Choice

Table 11-1
Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of the park.
-Refer to Table 11-1. Suppose the cost to build the park is $24 per acre. How many acres should the park be to maximize total surplus from the park in Springfield?

• A)1 acres
• B)2 acres
• C)3 acres
• D)4 acres

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Definitions:

Economies of Scale

Economies of Scale describe the cost advantages that a business can achieve due to expansion, leading to a lower cost per unit of output.

Long-run Average Total Costs

The per-unit production cost when all factors of production are variable and optimized for scale.

Long-run Average Total Cost

The per-unit cost of production when all inputs, including those typically fixed, can be varied, showing economies of scale if downward sloping.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, as the average cost of production falls with increasing output.