The accompanying table shows Tom and Ray's total willingness to pay for different amounts of public recreational areas (REC), which is measured in acres. The marginal cost of one acre of recreational area is $1,000. Tom's willingness to payRay's willingness to payREC (acres)$2,000$1,00013,0001,80023,800 2,50034,3003,10044,5003,60054,600 4,000 64,600 4,30074,600 4,40084,600 4,4009 What is the socially optimal level of recreational areas? What should be the tax burden to Tom and Ray so that their consumer surpluses are equal?

Calculate the socially optimal recreational area Compute marginal willingness to pay for both Tom…

Answered: he accompanying table shows Tom and…

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: Public Goods And Common Resources

Section: Chapter Questions

Problem 2PA

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The accompanying table shows Tom and Ray's total willingness to pay for different amounts of public recreational areas (REC), which is measured in acres. The marginal cost of one acre of recreational area is $1,000.

Tom's willingness to pay	Ray's willingness to pay	REC (acres)
$2,000	$1,000	1
3,000	1,800	2
3,800	2,500	3
4,300	3,100	4
4,500	3,600	5
4,600	4,000	6
4,600	4,300	7
4,600	4,400	8
4,600	4,400	9

What is the socially optimal level of recreational areas? What should be the tax burden to Tom and Ray so that their consumer surpluses are equal?

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