Road Repair Problem 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. Here & is my attempt to draw this. 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 of each individual dose is $25 (i.e., "marginal cost"), so 2 doses would cost in total $50, 3 doses cost $75, etc. Also, when doses are applied, they are applied to the entire road. Question 1 1 pts 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 his total value 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. Table: Benefits of Road Repairs Number of "Doses" Total Benefits to Marginal Benefit to Adam Adams 0 $50 -NA- 1 $90 40 2 $120 30 3 $140 20 $150 10 5 or more $150 0 Fill in the marginal benefits to Adams column. Write the number only, and do not include "$" or it will mark it incorrect. [Strictly speaking, the word "marginal" refers to infinitesimal rates of change, but it is commonly used loosely to refer to discrete changes, as in the present case.] It is important us "total" or "net total". These are different terms. An economic actor seeks to m imize their own net total benefits. Using ma ginal analysis, this will occur where the marginal cost equals [or is as close to without exceeding) the marginal benefit. The key to this assignment is understand these concepts clearly. Question 2 2 pts If only Adams is on the scene, what level of road repair would he choose? Explain how you know this in terms of marginal benefits and marginal costs. Edit View Insert Format Tools Table 12pty Paragraph v B I U A QV Ty | : 2 units is what he will choose, because marginal benefit at 2 units is 30 which is higher than all the other alternative choices. 1 24 words >
