# Natural resource economics

learn.

1) Suppose the demand curve for a public park is Q = 80 – 2p, where Q is the number of visitor-days and p is the entry price. The marginal cost of operating the park is MC = 10.

• a) What is the efficient level of entrance fee and the number of visitors at this fee level (assume no congestion problems)?
• b) At the price/quantity combination of (a), what is the price elasticity of demand for park visitation? (To find this, take a small change in price, say, \$1. Figure out the elasticity with the change in quantity resulting from this price change. The percentage change in price and quantity is different depending on whether the price has gone up by one dollar or down by one dollar. Take the average of the two estimates.)
• c) What is the price-quantity combination that maximizes revenues, and what is the price elasticity of demand at this point on the demand curve?
• d) Graphically illustrate this scenario, showing the demand curve, the MC curve, the efficient outcome from (a), and the revenue max outcome from (c)

2) If access to a hunting area is rationed by price, we can be sure that the level of visitation that results will maximize the social net benefits of the activity. If the same activity level is determined by lottery, however, we cannot be sure of this. A) Explain why not. B) How could a basic lottery be adapted to result in an economically efficient outcome?

3) Both mountain bikers and hikers enjoy Horsetooth Mountain Park. Assume there are more substitute hiking spots than there are biking trails. The marginal cost of both biker and hiker visits is \$7

A) Graphically illustrate the total demand for visits to the park and the separate demand curves for bikers and hikers.

B) Show the economically optimal amount of visitation for bikers and hikers.

C) Discuss (but do not graph) the effect of congestion on the optimal rate of visitation and who will be affected by this change in optimal visitation.

4) Consider a typical graphical model of market supply and demand as applied to the market for two endangered species products: rhino horn and elephant tusk (two separate markets). A global ban on the trade of endangered species products has been imposed. This is likely to affect both the demand and the supply for both products. The demand for rhino horn is relatively inelastic, since relatively few close substitutes exist. The demand for elephant tusk is relatively elastic, since good substitutes exist. A) Graphically illustrate in which market you would expect a ban to be successful and explain why. B) What alternatives to a ban are there that might improve the effectiveness of the policy to reduce the trade in endangered species products?

5) A) Show (graphically) how local and nonlocal interests might differ in assessing the desirability of a project or policy. B) Discuss the issues that create this divergence of interest. C) Use the data in the following table to illustrate this discussion through the lens of the Yellowstone National Park, USA to quantify the benefits, costs and net benefits to locals and the country at large.(I will attach the table if it does not show here).

-Please do not use any outside sources, I will upload a file that you could refer to, and it is include everything about those questions (even graphs).

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