Number of
Deidre's
Eugene's
Farhad's
Marginal Social
Acres
Willingness to
Willingness to
Willingness to
Pay (dollars)
Pay (dollars)
Pay (dollars)
Benefit (dollars)
$180
$140
$ 150
160
130
130
140
120
110
120
110
90
100
100
70
80
90
50
60
80
30
40
70
20
In an effort to maintain privacy and enhance property values, three homeowners, Deidre,
Eugene and Farhad, are considering leasing a portion of adjoining vacant land for a private
park. Table 5-1 shows each person's willingness to pay for each quantity of the land.
a) Complete the column in Table 5-1.
b) Graph the marginal social benefit curve.
c) Suppose the landowner is willing to lease a portion of her land according to the
following supply schedule given in Table 5-2. On the same diagram, graph the supply
curve.
Table 5-2
Number of
Price per Acre
Acres
(dollars)
1
$260
DO JOUWN
280
300
320
340
360
380
400
a) d. What is the optimal quantity of land that homeowners should lease? Explain your
answer.
b) e. Explain why a park of 5 acres is not optimal.
