Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Adams and Brash own lots A and B, respectively, of Section 210, bordering on State Route 11.The Adams lot (210A) is adjacent to the state

Adams and Brash own lots A and B, respectively, of Section 210, bordering on State Route 11.The Adams lot (210A) is adjacent to the state road and the Brash lot (210B) is immediately behind it.Access to 210B is provided for in an easement under which the owner of 210A must allow free passage to occupants of all inned lots.

Adams already has a house on lot A and has resided there for five years.Upon construction of the house, Adams also caused a road to be prepared, running from Route 11 to the back border of his lot.The road is not hard-surfaced, but is a type of "oiled gravel" surface common to private roads and driveways in rural areas.This kind of surface is subject to erosion and general deterioration over time.However, Pitts Gravel will come and provide any number of "doses" of road repair at a price of $25 per dose.

[The concept of a "dose" of an input is a pedagogical simplification that will be utilized a number of times below.It is used to collapse a heterogeneous, multidimensional package of possible adjustments to a single dimension.Hence "road repair" could be a mix of many different services in varying proportions, but no useful purpose is served by explicitly considering multidimensional adjustments.Through the simplification of road repaid into "dose" we can focus on a straightforward quantitative adjustment]

*Note: the cost ofeachindividual dose is $25 (i.e., "marginal cost"), so 2 doses would cost in total $50, 3 doses cost $75, etc.

Fortunately, we just happen to be in possession of Adams' true subjective evaluations of how much different levels of road repair are "worth" to him.Column 2 of the Table below shows histotalvalue of the services received from the road, assuming different levels of maintenance, i.e., different quantities of doses.Note that these values are "gross" of any costs incurred in purchasing the maintenance.

image text in transcribed
Marginal Benefit to Marginal Benefit to Number of "Doses" Total Benefits to Adams Adams Adams and Brash 0 $50 -NA- NA- 1 $90 2 $120 $140 A $150 5 or more $150

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Business Law Principles For Today's Commercial Environment

Authors: David P Twomey, Marianne M Jennings

2nd Edition

0324303947, 9780324303940

More Books

Students also viewed these Economics questions

Question

Do not go, wait until I come

Answered: 1 week ago

Question

Pay him, do not wait until I sign

Answered: 1 week ago