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. [20 points total] A city has three equally sized groups of people: avid hikers, casual hikers. and non- hikers. Each group's marginal benet of

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. [20 points total] A city has three equally sized groups of people: avid hikers, casual hikers. and non- hikers. Each group's marginal benet of hiking trails, measured in dollars per mile of trail, is given by Mam-d = 1000 7 200, MBCasmzl : 400 i 8Q. MBNan = 07 where Q is the miles of trails in the city's parks. Hiking trails are an example of a pure public good that is both nonrival and nonexcludable. Each mile of trail costs $630 to construct (i.e., MC 2 630). . [2 points] How many miles of trail will the avid hikers pay for if they pay the entire marg'nal cost of $630 and only consider their ovm benet? . [4 points] The casual hikers have no private incentive to pay $630 for additional miles, especially since they can free ride off the avid hikers\" expenditures. In contrast to that inefcient equilibritun, how many miles of hiking trails are economically efficient? [4 points] In a single diagram. with quantity on the X-axis and price on the yaxis, show your answers 'om parts a and I). Also, show the deadweight loss associated with the inefficient outcome from part a. [Be sure ta label all curves in The graph. Your graph neerl not be drawn m scale, but your answers taparfs a and b, along with The (leadwefghf lass, must be evident] [2 points] How big is the deadweight loss associated with the inefficient outcome from part a? . [4 points] As mayor, you propose that the city build the efcient mileage that you determined in part b, and each group (the avid hikers. casual hikers, and non-hikers) would pay for one-third of the total cost. Would this represent a Pareto improvement? Would this represent a Kaldor-Hicks improvement? Explain both answers. [4 points] In an effort to garner more public support, you decide to put the hiking trail issue to a direct, majority-rule vote. The median voter is in the casual hiker group, so you would expect the casual group's preferences to prevail in the election. How many miles does the casual group prefer if they have to pay for one-third of each mile's cost? (Note: 1/3\"1 of $630 is $210.) How big is the deadwei - It loss associated with this votirr- outcome

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