A Collaborative Federal and State Program Has Been Proposed in Response

question 37

Multiple Choice

A collaborative federal and state program has been proposed in response to acid rain damage in Newport Bay, Maryland. To estimate the incremental benefits of the program, you use the travel cost method based upon the following pre- and post-policy recreational demand functions:
Pre-policy: P = 62 - 0.02V₁ Post-policy: P = 80 - 0.02V₂,
where V is the number of visitors (in thousands) and P is the admission fee. Assume the admission fee is set at $20 per visitor. Use this information for any or all of Questions.
-The estimated incremental benefits (in thousands of dollars) associated with this new policy are

• A) 2,100
• B) 44,100
• C) 90,000
• D) 45,900

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Definitions:

Self-interest

The pursuit of individual advantage or profit, often regarded as a basic economic driving force.

Adam Smith

An 18th-century Scottish economist and philosopher, often considered the father of modern economics, best known for his theory of the invisible hand guiding free markets.

Competitive Markets

Markets where numerous producers and consumers interact, leading to price determination by supply and demand forces.

Information

Data, facts, or knowledge communicated or received concerning a particular fact or circumstance; essential for decision-making.