There are 20 neighbors on a street, each valuing the street repair at €3,000. The total cost to fix the street is €40,000. Which of the following statements is correct?

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The government should tax each resident €2,000 to fund the street repair, which is an efficient solution.Each neighbor paying €3,000 individually to fix the portion of street in front of their house is efficient.None of the provided options are accurate.It would be inefficient to proceed with repairing the street.

Explanation

Since the combined valuation of all neighbors (20 × €3,000 = €60,000) exceeds the repair cost (€40,000), it is efficient for the government to levy a €2,000 tax on each resident to cover the repair expense. This collective approach maximizes overall benefit compared to individual payments or not repairing.