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Suppose the state is trying to decide how many miles of a very scenic river it should preserve. There are 100 people in the community, each of whom has an identical inverse demand function given by P - 10 1.0q, where q is the number of miles preserved and P is the per- mile price he or she is willing to pay for q miles of preserved river. 1. (a) If the marginal cost of preservation is $500 per mile, how many miles would be preserved in an efficient allocation? (b) How large is the economic surplus?
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Ans :-suppose scenie ivei- should pr«serve . TheTe are 10o p*ople in the <»mmuni inverse demand ^uncHoo miles Drejserved !fr, m given in omaHon ,This is a public ee art loo demand curvel Verh The demand curve would intersec 550 perm^} e, 5 miles uould be preserved in an e 1Jenr allocaHon. so, 41250 İs→he eco no muc surplus.

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