Problem
Suppose that we observe people from three different zones going to a recreational site. People from zone A make a total of 200 trips which requires 40 miles round-trip travel. People from zone B make 150 trips which requires 80 miles round-trip travel, and people in zone C make 100 trips which requires 120 miles RT travel. Assume that there are equal #'s of people in each zone. Assume the only cost is travel, and it costs $0.25 per mile. The demand curve implied by the trips from the three zones is: P = 50 -.2Q
I. Write out the demand and price schedule and draw and label the demand curve.
II. What if going to the site caused an externality (for instance causing beach erosion at a beach, or disturbing nesting birds while hiking or bird watching, etc.). If this externality costs society $25 per trip, what is the total cost to society of people visiting the site as in part (I)? What are the total net benefits of visiting the site after considering the externality?