Answer to Question #276750 in Microeconomics for Anna

Question

Bart and Jeremy share an access road to each of their properties. They are thinking of having the access road paved. Bart is willing to pay $2000 for the paving process while Jeremy’s value for this is just $1200. Both people will benefit from the paving no matter who pays. To secure the contract for the paving job, what is the maximum the paving company can charge and still be assured of being hired by one of the property owners?

A. $800

B. $1200

C. $2,000

D. $3,200

Answer 1

Solution:

The correct answer is C. $2,000.

 

The maximum the paving company can charge and still be assured of being hired by one of the property owners is $2,000.00. This is because this is the price Bart is willing to pay for the paving process. Therefore, by charging this maximum price, you are assured that Bart will pay since his maximum price is $2,000.