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Chapter 31: Q. 10 (page 708)

The table below shows the estimated annual total costs and benefits of maintaining Asian elephant populations in their natural habitat.

Short Answer

Expert verified

The new optimal point would be 37500elephants.

Step by step solution

01

introduction

Subtracting the preceding cost or benefit yields the marginal cost or benefits a. Determine the marginal cost and benefit as follows:

02

step 2  The marginal cost and benefit of Asian elephant conservation:

The following table shows the marginal cost and benefit of Asian elephant conservation:

03

step 3  Graph showing in marginal cost and marginal benefit:

04

step 4  The optimal position is

b. The optimal position is where the marginal cost and benefit are equal. When the marginal benefit and cost are equal to 25, this happens with 30000 elephants.

05

the marginal benefit and marginal cost for 7500 would be: 

C.

If the benefit is reduced by $10million and the marginal cost is reduced by $40million for each 7500elephants, the marginal benefit and marginal cost for7500would be:

The new optimal point would be 37500elephants.

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The following table gives hypothetical annual total costs and total benefits of maintaining alternative populations of Asian elephants.

a. Calculate the marginal costs and benefits, and draw marginalbenefit and cost schedules.

b. Given the data, what is the socially optimal world population of Asian elephants?

c. Suppose that two events occur simultaneously. Technological development allows machines to do more efficiently much of the work that elephants once did, which reduces by \(10million the marginal benefit of maintaining the elephant population for each 7500increment in the elephant population. In addition, new techniques for breeding, feeding, and protecting elephants reduce the marginal cost by\)40million for each 7500increment in the elephant population. What is the new socially optimal population of Asian elephants?
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