Consider the market for trees in a public park. These trees are a public good that give benefits to multiple groups of people, as described below. Each Marginal Willingness to Pay curve represents the aggregation of all the individuals in that group, and those groups make decisions collectively. Additionally, the cost of planting trees is given. Consider Q to be the number of trees in the park. Note that no one is ever worse off from additional trees. Arborists: MWTP = 2000 – 5Q Total WTP = 2000Q - 2.5Q2Environmentalists: MWTP = 1500 – 10Q Total WTP = 1500Q – 5Q2Casual Park Visitors: MWTP = 800 – 10Q Total WTP = 800Q – 5Q2Park Haters: MWTP = 500 – 50Q Total WTP = 500Q – 25Q2MC = 1400 Total Cost = 1400Q (a) If the government does not intervene into the market, how many trees will be planted?(b) What is the socially optimal number of trees?

a. Without the involvement of the Government, each group will set their marginal willingness to pay…

Answered: Consider the market for trees in a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the market for trees in a public park. These trees are a public good that give benefits to multiple groups of people, as described below. Each Marginal Willingness to Pay curve represents the aggregation of all the individuals in that group, and those groups make decisions collectively. Additionally, the cost of planting trees is given. Consider Q to be the number of trees in the park. Note that no one is ever worse off from additional trees.

Arborists: MWTP = 2000 – 5Q Total WTP = 2000Q - 2.5Q²

Environmentalists: MWTP = 1500 – 10Q Total WTP = 1500Q – 5Q²

Casual Park Visitors: MWTP = 800 – 10Q Total WTP = 800Q – 5Q²

Park Haters: MWTP = 500 – 50Q Total WTP = 500Q – 25Q²

MC = 1400 Total Cost = 1400Q

(a) If the government does not intervene into the market, how many trees will be planted?

(b) What is the socially optimal number of trees?

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