Table 51 In an Effort to Maintain Privacy and Enhance Property Values

Table 5.1
$\begin{array}{|c|c|c|c|c|}\hline \begin{array}{c}\text { Number of } \\\text { Acres }\end{array} & \begin{array}{c}\text { Deidre's } \\\text { Willingness to } \\\text { Pay (dollars) }\end{array} & \begin{array}{c}\text { Eugene's } \\\text { Willingness to } \\\text { Pay (dollars) }\end{array} & \begin{array}{c}\text { Farhad's } \\\text { Willingness to } \\\text { Pay (dollars) }\end{array} & \begin{array}{c}\text { Marginal } \\\text { Social Benefit } \\\text { (dollars) }\end{array} \\\hline 1 & \$ 180 & \$ 140 & \$ 150 & \\\hline 2 & 160 & 130 & 130 & \\\hline 3 & 140 & 120 & 110 & \\\hline 4 & 120 & 110 & 90 & \\\hline 5 & 100 & 100 & 70 & \\\hline 6 & 80 & 90 & 50 & \\\hline 7 & 60 & 80 & 30 & \\\hline 8 & 40 & 70 & 20 & \\\hline\end{array}$
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
$\begin{array}{|c|c|}\hline \begin{array}{c}\text { Number of } \\\text { Acres }\end{array} & \begin{array}{c}\text { Price per Acre } \\\text { (dollars) }\end{array} \\\hline 1 & \$ 260 \\\hline 2 & 280 \\\hline 3 & 300 \\\hline 4 & 320 \\\hline 5 & 340 \\\hline 6 & 360 \\\hline 7 & 380 \\\hline 8 & 400 \\\hline\end{array}$
d. What is the optimal quantity of land that homeowners should lease? Explain your answer.
e.Explain why a park of 5 acres is not optimal.

Correct Answer:

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a.
Table 5-1
b and c.
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