Question

Refer to the information below to answer the following question. The table gives the each individual's marginal willingness to pay for three different levels of restoration (think of it like a segmented demand curve for three levels of quantity) Marginal Willingness to Pay for Restoring Bald Eagles Extent of restoration Low Moderate Extensive Marginal willingness to pay (MWTP) Bob 10 5 0 Carlos Anna 50 30 10 MC 25 10 40 40 40 What is the total benefit and total cost of conducting an extensive restoration? a. TB-15; TC-40 c. TB 90; TC 40 e. TB-145; TC 120 b. TB- 15; TC 120 d. TB- 90; TC 120 f. None of the above are correct If the marginal cost of restoring bald eagles at each level is 40, what is the optimal level of restoration? a. None, nobody cares about bald eagles b. None, but I do care about bald eagles c. Light d. Moderate e. Extensive

Answer 1

1) The marginal willingness to pay gives the benefit to each individual. Therefore the total benefit under extensive restoration equals 10+0+5 = 15 and total cost = 40.

Therefore, the correct answer is option a)

2) The correct answer is option d) because the total benefit is less than the cost of $40.