PS_5_ProblemSet

PS_5_ProblemSet - Assignment #5 Environmental Economics...

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Assignment #5 Environmental Economics ECON 409 / AEM 451 (Distributed April 18, 2008; due at the beginning of class on Thursday, April 24) You are welcome to work with others, but your write-up must be your own. 1. Travel cost method You have been commissioned to estimate the welfare effects of a proposed $5 entrance fee to North Woods National Park. There is currently no entrance fee . You decide that it is appropriate to use a zonal travel cost model. You conduct a survey in which you ask each person where he or she came from, so you know what percentage of current visitors are from each zone. You also obtain figures on current annual park attendance (i.e. attendance with no entrance fee). And you estimate travel costs (including time costs) to be $0.25 per mile. Your data are shown below. (Hint: calculate the travel costs and visitation rate). Zone Distance from Park (miles) Travel Cost ( π z ) per Visit Zonal Population (P z ) Number of Visitors (s z ) Visitation Rate (v z ) 1 20 5,000 600 2 40 25,000 2,500 3 60 100,000 8,000 4 80 200,000 12,000 5 100 10,000 400 6 120 75,000 1,500 a) Estimate a visitation equation of the form: v z = β 0 β 1 *( π z + ƒ ) where v z and π z are the visitation rate and travel cost, respectively, for zone z , ƒ is the entrance fee, and β 0 and β 1 are parameters to be estimated. To estimate these parameters, simply plot v z vs. ( π z + ƒ ) below. β 0 is the intercept of this line and β 1 is the slope. [Hints: This is a straight line. Extend the line all the way to both axes]. v z π z + ƒ
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b) Calculate the demand curve for visits to North Woods National Park. Total demand for park visits is given by: q( ƒ ) = Σ z P z [ β 0 β 1 *( π z + ƒ )] where q( ƒ ) is the total visits as a function of the entrance fee (price), Σ z is the summation operator, and P z is the population of zone z . To verify that this equation has been estimated correctly, check that q(0) is exactly the current number of visits taken, as indicated in the
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This homework help was uploaded on 02/19/2009 for the course AEM 4510 taught by Professor Shawhan,d. during the Spring '08 term at Cornell.

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PS_5_ProblemSet - Assignment #5 Environmental Economics...

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