3. Following are portions of the demand curves of three individuals for the water quality in a small pond. The water quality is expressed in terms of the parts per million (ppm) of dissolved oxygen (DO). Water quality improves at higher DO levels. The demand curves show the marginal willingness to pay of each individual (A, B, C). a. Complete the table. Find the aggregate marginal willingness-to-pay curve of these three people at each DO level. b. If the actual marginal cost of increasing DO is $12, what is the socially efficient level of DO in the lake, assuming these three people are the only ones involved? Marginal WTP DO Level Aggregate MWTP (ppm) A B $10 $10 $12 1 10 4. 8. 4. 2 4429 456

3. Following are portions of the demand curves of three individuals for the water quality in a small pond. The water quality is expressed in terms of the parts per million (ppm) of dissolved oxygen (DO). Water quality improves at higher DO levels. The demand curves show the marginal willingness to pay of each individual (A, B, C). a. Complete the table. Find the aggregate marginal willingness-to-pay curve of these three people at each DO level. b. If the actual marginal cost of increasing DO is $12, what is the socially efficient level of DO in the lake, assuming these three people are the only ones involved? Marginal WTP DO Level Aggregate MWTP (ppm) A B $10 $10 $12 1 10 4. 8. 4. 2 4429 456

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Following are portions of the demand curves of three individuals for the
water quality in a small pond. The water quality is expressed in terms of the
parts per million (ppm) of dissolved oxygen (DO). Water quality improves at
higher DO levels. The demand curves show the marginal willingness to pay
of each individual (A, B, C).
a. Complete the table. Find the aggregate marginal willingness-to-pay curve
of these three people at each DO level.
b. If the actual marginal cost of increasing DO is $12, what is the socially
efficient level of D0 in the lake, assuming these three people are the only
ones involved?
Marginal WTP
Aggregate
MWTP
DO Level
(ppm)
A
B
C
$10
$10
$12
1
8
10
6
8.
4.
6.
4.
6.

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