Explain different levels of a hypothetic, Macroeconomics

Suppose that a public park is visited by people living in five concentric zones around the park. Each zone has a population of 5000, and the total travel cost for a visit to the park from zone i is given by TCi = 4 (i -1), where i = 1 , ... , 5. For each zone, the estimated relationship between visitation rate V (defined as annual number of visits/1000) and total travel cost (TC) is given by V = 100 - 5 TC.

(a) For each zone, obtain an equation relating the total number of visits from that zone to different levels of a hypothetical fee charged per visit.

(b) Write down in equation form (and also depict in a diagram) the aggregate demand curve for the park and use this curve to compute the annual user value of the park.

(c) Suppose that the annual maintenance cost of the park is 30,000 and the local government is under considerable pressure to sell the park to urban developers. What would you advise in this case ? Use the information obtained in 2(b) and list any additional factors that may need to be investigated before arriving at the correct decision.


Posted Date: 3/19/2013 6:00:19 AM | Location : United States

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