What is the efficient number of kilometres

Reference no: EM131072630

Evan rides his mountain bike down Whistler each summer weekend. The utility value he places on each kilometre ridden is given by P = 4-0.02Q, where Q is the number of kilometres. He incurs a cost of $2 per kilometre in lift fees and bike depreciation.

(a) How many kilometres will he ride each weekend? [Hint: Think of this "value" equation as demand, and this "cost" equation as a (horizontal) supply.]

(b) But Evan frequently ends up in the local hospital with pulled muscles and broken bones. On average, this cost to the Canadian taxpayer is $0.50 per kilometre ridden. From a societal viewpoint, what is the efficient number of kilometres that Evan should ride each weekend?

Reference no: EM131072630

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