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

question 181

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 and that the residents have agreed to split the cost of building the park equally. If the residents decide to build a park with size equal to the number of acres that maximizes total surplus from the park, how much total surplus will Sophia receive?

• A)-$5
• B)-$2
• C)$0
• D)$2

---

Definitions:

Revaluation Surplus

The increase in value of an asset, recognized in the equity section of a company's balance sheet, when its fair market value is higher than its net book value.

Contributed Capital

Funds raised by a company through the issuance of shares to investors, also known as share capital or paid-in capital.

Share Premium

The amount received by a company over and above the par value of its shares when issuing new shares; also known as additional paid-in capital.

Share Premium

The amount received by a company over and above the face value of its shares when issued.