MATH PROBLEM 2 and 3
2. Lincoln County has hired your economic consulting firm to calculate the net benefits from recreation visits to Seal Rock Wayside. Admission to Seal Rock is currently free. You conduct some field work and initial research that yields the following information:
City/Town Miles from Seal Rock Population (1000 s) Number of Vehicles Estimated visitors Visit rate (per 1000 people) 4.3 Corvallis 58 58 35 250 Albany 70 54 15 130 2.4 Newport 9 11 40 1,000 90.9 Lincoln City 32 10 30 700 70.0 Yachats 14 1 25 200 200.0
You estimate that each vehicle carried 3.5 persons (2.2 adults), on average, and make the following assumptions: The average operating cost of vehicles is $0.65 per mile. The average speed on county highways is 50 miles per hour. The opportunity cost to adults of travel time is 30 percent of their wage rate; it is zero for children. Adult visitors have the average county wage rate of $12 per hour. This information is summarized in the attached Excel spreadsheet.
a. Calculate travel cost per vehicle and travel cost per person for each town. 3 pts.
b. Create a scatter plot with travel cost per person on the X axis and visit rate on the Y axis. Fit a line through the data and report the slope. Make sure to include your plot with your answer. 3 pts
c. You know demand when admission is free. Find additional points on the demand curve by predicting visitors from each town as the fee goes up in $10 increments, until the demand is zero. Follow these steps: Calculate new rate = old rate + (fee slope) New number of visitors = New rate Population Get total number of visitors and plot D curve 4 pts
d. Estimate annual benefit to visitors by calculating the area under the demand curve. 3 pts
3. In an example for use of the Value of a Statistical Life in BCA we calculated the benefits of increasing the speed limit for a highway (Week 8). To get additional practice and a better understanding of the use of VSL, this exercise asks you to calculate the benefits of reducing the speed limit. Suppose the area around a 30-mile stretch of highway has become more urbanized and traffic has increased, so city planners are considering lowering the speed limit on the highway as it passes the town from 65 mph to 50 mph. The relevant information is available in the attached Excel spreadsheet. Use the worked example from week 8 as a guide to answer the following questions.
a. Calculate additional travel time costs by calculating average travel time before and after, then calculating the difference. Then calculate total time added. 2 pa
b. Calculate costs as the value of time added to leisure and business travelers. 2 pts
c. Calculate benefits as avoided operating, fatal crash, and non-fatal crash costs. 2 pts
d. Calculate NSB. Should the speed limit be lowered? 2 pts
