Question

Evan rides his mountain bike down Whistler each summer weekend. The value he places on each...

Evan rides his mountain bike down Whistler each summer weekend. The value he places on each kilometre ridden is given by P=4−0.02Q, where Q is the number of kilometres. He incurs a cost of $2 per kilometre in lift fees and bike depreciation.

(a) How many kilometres will he ride each weekend? [Hint: Think of this “value” equation as demand, and this “cost” equation as a (horizontal) supply.]

(b) But Evan frequently ends up in the local hospital with pulled muscles and broken bones. On average, this cost to the Canadian taxpayer is $0.50 per kilometre ridden. From a societal viewpoint, what is the efficient number of kilometres that Evan should ride each weekend?

Homework Answers

Answer #1

a) The number of kilometres Evan will ride each weekend is at the point where,

4 - 0.02Q = 2

0.02Q = 4 - 2 = 2

Q = 2 / 0.02 = 100

Thus, Evan will ride 100 kilometers each weekend.

b) Marginal social cost = 2 + 0.50 = 2.50

The efficient number of kilometres that Evan should ride each weekend is at the point where,

4 - 0.02Q = 2.50

0.02Q = 4 - 2.50 = 1.50

Q = 1.50 / 0.02 = 75

Thus, the efficient number of kilometres that Evan should ride each weekend is 75 kilometers.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT