Consider a situation where there is a lake, call it S (for site), which is visit

ID: 1215708 • Letter: C

Question

Consider a situation where there is a lake, call it S (for site), which is visited for recreation by the residents of 3 towns: A, B, and C. Town populations and distances to the lake are given in the following table:

3.) Find the number of visits to each cite

A.) Help fill in table

Thanks!

Town Distance to lake S, miles Population 10 20 30 100 200 300 The hourly wage rate is $12 in all three towns, and, because of differing topographic conditions and road quality, it takes residents from all the three towns 1 hour to drive to the lake and come back to their town. Assume that the value of time spent driving is 1/3 of the hourly wage rate. Further assume that everyone drives vehicles that have 29,Tg&fuel; economy, and everyone drives alone. The price of gas is S4/gallon. Trips are single-purpose trips (for recreation only) Researchers estimated that the individuof recreation demand function can be expressed as: Trips per Year = 3-0.1 'Cost of Single Trip Hint: Follow the in-class example to derive the 3 demand curves. To do that, do the folNowing 1) Convert the individual demand function into an inverse demand function. We have gLPJ:3. 0.1"P, so PiO-30-10 a 2) Recognize that travel cost from each town introduces tux" of sorts, so the individual demand curve for a town becomes ea) 30 Travel Cost 10 . Calculate the trovel costs for each town fremember, a trip involves going to the lnke and coming back, and arrive at the 3 individual demand curve 3 Use the individual demand curves to find the number of visits, etc. Remember to multiply that value by the towns popuiation to get the right number for the town [5 points] The local government is considering charging fees for lake access. Assume that the fee revenue will not affect the quality of the lake. Fill in the missing values in the following table a. Fee charged per trip, $ Number of trips fram town A {trips per yearl Total number Number of Number of trips from trips from of recreators at | town B | town -trips | the lake [visits per yearl trips per per year year 0 (current situation 10 20

Explanation / Answer

Fee charged per trip

Number of trips from town A (trips per year)

Number of trips from town B (trips per year)

Number of trips from town C (trips per year)

Total number of recreators at the lake (visits per year)

220

360

420

1000

170

260

270

700

120

160

-180

100

-40

-480

-500

Trip per year = 3-0.1*cost of single trip

Cost of single trip = Time + Gas+ Fees charged

When fee charged is 0 then

Cost of single trip (A) = 4 + 4 = 8

Cost of single trip (B) = 4 + 8 = 12

Cost of single trip (C) = 4 + 12 = 16

Trips per year (A) = 3-0.1*8 = 2.2

Trips per year (B) = 3-0.1*12 = 1.8

Trips per year (C) = 3-0.1*16 = 1.4

The same process needs to be followed for the rest fee charged