Question

QUESTION 9 Lachlan has a Jacaranda growing in his yard. One of the tree limbs is growing over into Dan's property. Dan does not like this and wants Lachlan to chop down the tree. Their respective benefits are shown below: Gains to Lachlan ($) Gains to Dan ($) Total ($) Keeping Tree 1000 100 1100 Chopping Down Tree 500 759 What is the maximum amount that Dan would be willing to pay Lachlan to chop down the tree and still be better off by $1? Answer to the nearest whole number in dollars (with no decimal places, $ sign, spaces or commas)

Answer 1

Solution:

Lachlan would be willing to chop down the tree if he gets minimum $1000 because this is the gain Lachlan gets by keeping tree. Dan gains only $100 by keeping tree and $759 by chopping down the tree. Thus if Dan gives $658 then Lachlan would gain 500+658 = $1158 (Lachlan would have no problem in chopping the tree). Dan would still gain $101. By keeping tree he was gaining $100, by chopping tree he is still better off by $1.

Hence the maximum amount that Dan can give to Lachlan is $658.