Reference no: EM131759126

Question: Jellystone National Park is located 10 minutes away from city A and 20 minutesaway from city B. Cities A and B have 200,000 inhabitants each, and residents in both cities have thesame income and preferences for national parks. Assume that the cost for an individual to go to anational park is represented by the cost of the time it takes her to get into the park. Also assume thatthe cost of time for individuals in cities A and B is $.50 per minute. You observe that each inhabitantof city A goes to Jellystone ten times a year while each inhabitant of city B goes only ?ve times a year.Assume the following: the only people who go to the park are the residents of cities A and B; the costof running Jellystone is $1,500,000 a year; and the social discount rate is 10%. Also assume that thepark lasts forever.

(a) Compute the cost per visit to Jellystone for an inhabitant of each city.

(b) Assuming that those two observations (cost per visit and number of visits per in- habitant of cityA, and cost per visit and number of visits per inhabitant of city B) correspond to two points ofthe same linear individual demand curve for visits to Jellystone, derive that demand curve. Whatis the consumer surplus for inhabitants of each city? What is the total consumer surplus?

(c) There is a timber developer who wants to buy Jellystone to run her business. She is o?ering $100million for the park. Should the park be sold?