a. What is the Travel Cost Method (TCM) of estimating environmental benefits? Within your discussion, be sure to provide its strengths and weaknesses.
b. People can pay a small fee (€5) to swim in the river Seine in Paris. During 2006, the river was polluted due to a toxic spill. The City of Paris initiated a policy severely restricting dumping in the Seine. As a result, the river has been substantially cleaner since 2007.
Help the City of Paris decide how much abatement it should require of the company, Bateaux Mouches (the only company that operates on the Seine and hence pollutes it), if the abatement is to be efficient, given the following information:
MSB = 15 - 0.4A
MAC = 5 + 0.2A
MCE = 1 + 0.1A
Where A is the percentage of abatement; and MSB, MAC, and MCE are measured in millions of Euros (€).
c. Using the TCM, calculate the benefits of this policy that cleaned up the Seine River in Paris. The recreational demand for swimming in the Seine (the fee for swimming in the Seine is €5 per person), prior to the policy (pre-clean up), and after the policy (postclean up) are as follows:
Pre-clean up: P = 72 - 0.04S0
Post- clean up: P = 90 - 0.04 S1
where S0 is the number of swimmers in the Seine before the clean up,
and S1 is the number of swimmers after the clean up, and P is the fee to swim in the Seine