AEM_451_Problem_Sets_Solutions

AEM_451_Problem_Sets_Solutions - AEM 451/Econ 409 Suggested...

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AEM 451/Econ 409 Suggested Solutions for Problem Set #5 Spring 2008 1) See the attached Excel spreadsheet for completed figures and calculations. a) We can find the slope by looking at the change in visitation rate and travel costs between any two zones. For example, between zones 1 and 2, the visitation rate declines by 0.02, and the cost increases by 5. (-0.02/10) = -0.002. Then, we can use this slope to find the intercept. The travel cost in zone 1 is $10, and the visitation rate is 0.12. If the travel cost were $0, this would be a change of $10 x 0.002 = +0.02, so the visitation rate would be 0.14. Thus, our equation takes the exact form Vz=0.14-0.002( Π z+f) b) To find the demand curve, we need to set f = 0,5,10,15, etc, and find the total visitation from each zone. Note that negative visits don’t make sense, so at some point you need to replace negative values with zeroes when calculating total visits. c) The consumer surplus can be calculated by summing the area of the rectangles and
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AEM_451_Problem_Sets_Solutions - AEM 451/Econ 409 Suggested...

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