Suppose there is a public park. The annual cost of maintenance is $200,000. Visiting the park is free, and it is visited 210,000 times every year. However, to fund better maintenance of the park, the government wants to make visitors pay $4.70 per visit. Implementing a security system (to prevent visitors from sneaking into the park) will cost $0.50 per visit and $260,000 in annual fixed expenditures. At the same time, maintenance costs are expected to rise by 23%, not including security costs. The number of visits to the park is expected to fall by 34%

Suppose there is a public park. The annual cost of maintenance is $200,000. Visiting the park is free, and it is visited 210,000 times every year. However, to fund better maintenance of the park, the government wants to make visitors pay $4.70 per visit. Implementing a security system (to prevent visitors from sneaking into the park) will cost $0.50 per visit and $260,000 in annual fixed expenditures. At the same time, maintenance costs are expected to rise by 23%, not including security costs. The number of visits to the park is expected to fall by 34%

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter20: The Problem Of Adverse Selection Moral Hazard

Section: Chapter Questions

Problem 20.3IP

See similar textbooks

Similar questions

Honda Motor Company is considering offering a $1,800 rebate on its minivan, lowering the vehicle's price from $31,000 to $29,200. The marketing group estimates that this rebate will increase sales over the next year from 40,900 to 53,500 vehicles. Suppose Honda's profit margin with the rebate is $5,340 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits. The cost of the rebate will be $ million. (Round to one decimal place.) The benefit of the rebate will be $ million. (Round to one decimal place.) Is it a good idea? (Select from the drop-down menu.) Offering the rebate look attractive. does not does
Honda Motor Company is considering offering a rebate on its minivan, lowering the vehicle's price from to . The marketing group estimates that this rebate will increase sales over the next year from to vehicles. Suppose Honda's profit margin with the rebate is per vehicle. If the change in sales is the only consequence of this decision, what are its benefits and costs? Is it a good idea?
Jeff is driving down the road. Jeff is texting, drinking a diet soda, and playing with the radio. Ricardo is driving on the road in the opposite lane of traffic. Ricardo is eating chicken wings and checking out a cute girl that is walking on the sidewalk adjacent to the road. Jeff and Ricardo hit each other head one. Jeff sustains $100,000 in damages. Ricardo sustains $10,000. It is determined that Jeff was 75% at fault and Ricardo was 25% at fault. Under a contributory negligence statute, what is Ricardo's possible recovery from Jeff for his injuries? O A. $25,000 B. $2,500 O C. s0 O D. $10,000
You go on vacation in London and find a replica of the fuzzy hats that Buckingham Palace guards and decide it would make the perfect souvenir. The vendor who is selling the hat is asking £70 for it. If $1 buys £1.10, how much is the hat costing you? $636 $70 $77 $63.63
Is calculators a quasi public good due to technology? Why?
Why do governments (city, state or national) often provide funding for creating and maintain public parks? What incentives may cause businesses to contribute to park funding?
Fly by night over Uttar Pradesh in northern India, the country’s most populous state, and its cities appear as dazzling islands. In between, however, lies an inky sea. Perhaps two-thirds of Uttar Pradesh’s 200 million people have no regular electricity. In India, 700 million, or more than half of the population, suffer unreliable connections to the national grid, or none. Often, once the sun drops, darkness prevails. On paper, plans exist for linking the country’s northern and southern grids. That would help, yet nobody expects rural India to be properly plugged in for a long time yet. Meanwhile, the villagers soldier on with paraffin lamps, which harm lungs and emit a dim light that is of little use for school homework. Also, darkness breeds danger, so women stay home after the sun goes down. A lack of electricity limits business, as markets and shops close early. Banks have been ordered to reach villages and provide basic financial services, but they need electricity to do so. And…
How did the COVID-19 pandemic affect the economic, social, and political aspect of the Transportation System in the Philippines?
You are considering whether you should go out to dinner at a restaurant with your friend. The meal is expected to cost you $40, you typically leave a 20% tip, and an Uber will cost you $5 to get there. You value the restaurant meal at $20. You enjoy your friend’s company and are willing to pay $30 just to spend an evening with her. If you did not go out to the restaurant, you would eat at home using groceries that cost you $8. How much are the benefits and costs associated with going out to dinner with your friend? Should you go out to dinner with your friend?
Which of the following is most likely to be the best method of reducing the usage of personal cars by the public? a) Decrease of road taxes and fines. b) Building more road and infrastructures. c) Increasing the speed limit on the highways. d) Increasing the parking fees and other service charges.
Suppose that the annual maintenance cost of a public park is $40,000. The park has no entrance fee and the local government is under considerable pressure to sell it to urban developers. You are asked to estimate the value of the park to the public by using the travel cost method. The park is visited by people living in five concentric zones around it. Each zone has a population of 5000, and the total travel cost for a visit to the park from zone i is given by TCi = 4 (i -1), where i = 1,...,5. For each zone, the estimated relationship between visitation rate V (defined as annual number of visits/(population of zone/1000)) and total travel cost (TC) is given by V = 100 - 5 TC. (a) For each zone, obtain an equation relating the total number of visits from that zone to different levels of a hypothetical fee charged per visit.
Put yourself in the shoes of the Egyptian Government. The country is already suffering from severe water shortages. In the future, the number of people needing water is going up drastically and the amount of water available will decrease once the dam in Ethiopia is finished. What actions does the government have available? Come up with three options. Discuss the cost/benefits or pros/cons of each option. Evaluate the options and determine which one would be the best for the people of Egypt and their security.