Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

i know this question is really big but someone can help me this. Problem 2: [40 ppoints] The Regional Forest District manager proposes a new

i know this question is really big but someone can help me this.

image text in transcribedimage text in transcribedimage text in transcribed
Problem 2: [40 ppoints] The Regional Forest District manager proposes a new campsite for visitors at Largo Lake: it will cost $550,000 to build and $5000 per year to maintain it. a) If the interest rate is 1=6%, what would be the minimum value of perpetual annual benefits for this project to make sense (be feasible)? Show (explain) your work. [5points] The forest manager is unsure if the campsite will generate enough benefit to justify the investment so he commissions a study by an economic consulting company to estimate the potential demand for the campsite. As the campsite is only a proposal, the economic consulting company conducts a travel-cost study on the Corto Lake campsite, a campsite with similar characteristics in a neighboring forest region and serves a similar population base. The following survey data was collected on the visitors to the Corto Lake campsite during one year, to evaluate the demand on the site. No admission fee is currently charged at the Corto Lake campsite. Zone Zone population Average travel cost Visits per year from home to park 3000 10 1500 2 4800 15 1920 3 2000 25 400b) Using the information in the table above. fill out the table below that give the estimated number of visits per 1000 people for each zone and indicated travel costs? Interpolate as needed, and disregard fractions. Show all your working steps. [5 points] Zone $0 $5 $10 $15 $20 $25 $30 $35 2 Total 2c) In the table below, fill in the estimated number of visits for each zone and total visits for different hypothetical park entrance fees. Explain the key assumptions to produce such a table. [ 8 points] Zone $0 $5 $10 $15 $20 $25 $30 2 3 Total d) Draw the recreation demand using the information above and calculate the total annual consumer surplus generated from the Largo Lake campsite. Show all your work. [8 points] e) If your manager is sure that the Corto Lake study is a good proxy for the proposed Largo Lake campsite, should the Forest Manager invest in the new campsite? Explain. [3 points] The Forest Manager learns that the government has instituted a new policy that requires all public campsites to be financially self-sufficient. Now the Forest Manager must consider an appropriate admission fee to charge at the new campsite at Largo Lake. f) What admission fee should the manager charge so the campsite breaks even? [3 points] g) What admission fee should the manager charge to maximize expected net revenues from the campsite? [3 points] h) If there was no such government policy to recoup invested capital, and you are free to make the pricing decision, as Forest manager of this public campsite, what would you charge for an entrance fee? Why? [5 points]

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

Water Pollution Economics Aspects And Research Needs

Authors: Allen V Kneese

1st Edition

1317387554, 9781317387558

More Books

Students also viewed these Economics questions

Question

5. Give examples of binary thinking.

Answered: 1 week ago