An analyst was asked to predict the gross social benefits of building a public swimming pool in Dryville, which has a population of 65,000 people and a median household income of $40,000. The analyst identified 24 towns in the region that already had public swimming pools. He conducted a telephone interview with the recreation department in each town to find out what fee it charged per visit (FEE) and how many visits it had during the most recent summer season (VISITS). In addition, he was able to find each towns population (POP) and median household income (INCOME) in the most recent census. His data are in Homework #2 spreadsheet.

Use the data in the Homework #2 Spreadsheet to do the following:

Regress the number of visits on the other three variables included in the spreadsheet.

Using the results of your regression do the following:

Clearly present the form of the regression equation, including the beta coefficients you have found from regressing visits on, FEE, VISITS, and INCOME.

Present the ordinary demand equation for Dryville.

Present the inverse demand equation for Dryville.

Calculate and present the consumer surplus assuming a $0 fee entrance to the pool.

What would be the total social surplus if the town of Dryville charges a $1.25 entry fee, assuming $0 marginal costs, and an excess tax burden of .25? (In answering this question, assume that the fees are used to reduce taxes that would otherwise have to be collected from the citizens of Dryville to pay for expenses incurred in operating the pool.) Explain and clearly label your answer.

Using your response to (e), what would be the total social surplus if the pool cost $150,000 to construct and all of its construction cost were paid for by taxes. Explain and clearly label your answer.