Monday

July 28, 2014

July 28, 2014

Posted by **Ryan** on Monday, January 30, 2012 at 8:43pm.

Marginal Benefits of fishing the River Marginal Costs of fishing the River

MB Q (fishermen) MC Q (fishermen)

0 3000 90 3000

15 2500 75 2500

30 2000 60 2000

45 1500 45 1500

60 1000 30 1000

75 500 15 500

90 0 0 0

1. Calculate the fee the government should charge the fisherman for access to the river in order to maximize net benefits in a given year.

2. Using the price you calculated in Question 1, calculate the net benefits to society derived from the river in a given year.

3. Assume that the net benefits you just calculated (in Question 2) will continue from year 0 through year 10. Also assume that the dam would cost $250,000 in year 0 and then have annual maintenance costs of $30,000 in year 1 through year 10, while it would create $140,000 in benefits starting in year 1 and continuing through year 10. Calculate the Present Value of Net Benefits for leaving the river untouched and for constructing the dam over the period from year 0 to year 10 with a 4% discount rate and an 8% discount rate.

4. Explain why the project with higher discounted net benefits changes when we use a different discount rate?

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