A local government is considering building new public hiking trails in town. Suppose that the trails are public goods. There are two types of people in a small town economy, 1000 avid hikers and 1000 non-hikers, who have typical individual marginal benefit curves: MB_H = 350 − 5Q and MB_N = 240 − 6Q for the hikers and the non-hikers respectively, where Q is the miles of trails. On the same graph, draw the marginal benefit curves for each type of person and MB of the overall economy. If the marginal cost providing this public good is $27000 per mile what is the optimal level of the public good?
A local government is considering building new public hiking trails in town. Suppose that the trails are public goods. There are two types of people in a small town economy, 1000 avid hikers and 1000 non-hikers, who have typical individual marginal benefit curves: MB_H = 350 − 5Q and MB_N = 240 − 6Q for the hikers and the non-hikers respectively, where Q is the miles of trails. On the same graph, draw the marginal benefit curves for each type of person and MB of the overall economy. If the marginal cost providing this public good is $27000 per mile what is the optimal level of the public good?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A local government is considering building new public hiking trails in town.
Suppose that the trails are public goods. There are two types of people in a small
town economy, 1000 avid hikers and 1000 non-hikers, who have typical individual
marginal benefit
and the non-hikers respectively, where Q is the miles of trails. On the same graph,
draw the marginal benefit curves for each type of person and MB of the overall
economy. If the marginal cost providing this public good is $27000 per mile what
is the optimal level of the public good?
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