Question

Simon owns land along the shore of Lake Michigan. The table below describes the marginal benefits to tourists of recreating along his property (per person who has access for a day), as well as the marginal costs to Simon of more people getting access to the shore (due to litter, noise, and seeing other people on the shore).

No. People	1	2	3	4	5	6	7	8	9	10
Marginal Benefit, People	150	110	80	60	40	25	10	-10	-30	-60
Marginal Cost, Simon	10	20	30	40	50	60	70	80	100	125

(a) If Simon could not limit access across his property to the shore or otherwise limit or influence tourists' behavior, how many people would go to the seashore? (Fractions of people cannot exist. Give a whole-number answer.) Explain your answer.

(b) What is the efficient number of people to use Simon's shore? (Fractions of people still cannot exist. Give a whole-number answer.) Explain your answer.

(c) Now, Simon has the right and the ability to prevent people from using his property. In the absence of government programs to control seashore access, is there any way that the efficient solution might be achieved? If so, how? If not, why not?

Answer 1

(a) If Simon could not limit access across his property to the shore or otherwise limit or influence tourists' behavior, how many people would go to the seashore? (Fractions of people cannot exist. Give a whole-number answer.) Explain your answer.

If Simon could not limit the access across his property to the shore or otherwise limit or influence tourist’s behavior, then only one person will go because the marginal benefit is maximum at 1^st person only. And the Marginal Cost of Simon is least at that point. After the first person, if any individual would visit the site, his Marginal Benefit will starting declining as compare to the first person.

No. People	1	2	3	4	5	6	7	8	9	10
Marginal Benefit, People	150	110	80	60	40	25	10	-10	-30	-60
Marginal Cost, Simon	10	20	30	40	50	60	70	80	100	125

(b) What is the efficient number of people to use Simon's shore? (Fractions of people still cannot exist. Give a whole-number answer.) Explain your answer.

Efficient number of people will be at the intersection of the sum of Marginal Benefit of all the individuals and the Marginal Cost curve. Since the Marginal Benefit of people is more than the Marginal Benefit of Simon till 4^th unit of people, i.e., the Marginal Benefit of people is 60 at 4^th unit and the Marginal Cost of Simon is 40 at this point. After this particular point, the Marginal benefit of people started decreasing and the Marginal Cost of Simon started to increase. Therefore, the efficient number of people for using Simon’s share is 4 people.

No. People	1	2	3	4	5	6	7	8	9	10
Marginal Benefit, People	150	110	80	60	40	25	10	-10	-30	-60
Marginal Cost, Simon	10	20	30	40	50	60	70	80	100	125

(c) Now, Simon has the right and the ability to prevent people from using his property. In the absence of government programs to control seashore access, is there any way that the efficient solution might be achieved? If so, how? If not, why not?

Now, if Simon has the capability and the right for preventing people from utilizing his property and in the nonappearance of government programs for controlling access to seashore, entry fees could be charged by Simon from the people with the intention that there is decline of Marginal Benefit of people by paying the fees and the people’s efficient level can be attained. This is for the reason that non-excludability feature of the public good would be removed if people would pay fees for entrance.