The accompanying table shows Tom and Ray's total willingness to pay for different amounts of public recreational areas (REC), which is measured in acres. The marginal cost of one acre of recreational area is $1,000. Tom's willingness to payRay's willingness to payREC (acres)$2,000$1,00013,0001,80023,800 2,50034,3003,10044,5003,60054,600 4,000 64,600 4,30074,600 4,40084,600 4,4009 What is the socially optimal level of recreational areas? What should be the tax burden to Tom and Ray so that their consumer surpluses are equal?

Calculate the socially optimal recreational area Compute marginal willingness to pay for both Tom…

Answered: he accompanying table shows Tom and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The accompanying table shows Tom and Ray's total willingness to pay for different amounts of public recreational areas (REC), which is measured in acres. The marginal cost of one acre of recreational area is $1,000.

Tom's willingness to pay	Ray's willingness to pay	REC (acres)
$2,000	$1,000	1
3,000	1,800	2
3,800	2,500	3
4,300	3,100	4
4,500	3,600	5
4,600	4,000	6
4,600	4,300	7
4,600	4,400	8
4,600	4,400	9

What is the socially optimal level of recreational areas? What should be the tax burden to Tom and Ray so that their consumer surpluses are equal?

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