Question

Estimate the total economic benefit of the lake by calculating the consumer surplus (or the area under the demand curve). This results in a total estimate of economic benefits from the lake uses around $23,000 per year, or around $14.38 per visit ($23,000/1,600). Remember that the objective is to determine whether it is worthwhile to spend money to protect the lake by implementing programs to improve the water quality. If the actions cost less than $23,000 per year, the cost will be less than the benefits provided by the lake. If the costs are greater, the staff will decide whether other factors are worthwhile. You should make recommendations that will influence a decision on whether it is worthwhile to spend money on programs to improve the water quality of the lake over the long run and the short run. Also make recommendations on the additional information to gather in a survey to enhance this study.

Entry Fee $20 $30 $40 $50 Total Visits 409 129 20 These points give the demand curve for trips to the lake.

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Answer 1

Ans ) The social and private cost , benefit gives the analysis that project should be taken in account or not. If social cost is greater then private benefit then project will not be taken into account whereas if the private benefit is greater then social cost then project will be taken into account by private industries or business because there is benefit from the particular project. Where as if govt is applying any policy it will consider that social benefit should be greater then private cost they are not applying for profit motive and the policy will not apply if social benefit is less then cost. In the above question as the total demand will be $ 12850 which is less then the total cost $23000 so the govt may not take the project of cleaning the water or spending money on water cleaning programmes .