Assume there are two families in the community, Family A

Assume there are two families in the community, Family A and Family B, who have the same income, same tastes, same number of adults and children, and face the same set of prices of all goods & services except that of access to an alpaca farm. Family A lives further away from the farm than Family B and hence incurs a higher travel cost per visit. There is no admission charge to enter the farm, however, the farm is considering limiting each family to a maximum of 20 per year. The following data summarise their annual visit to the alpaca farm:

Family

Travel Cost per Visit

Visits per annum

A

$40

10

B

$20

30

Assume the inverse demand curve is linear, that is Cost = a + b*visit

If there is no annual limit of visits, the annual benefit to the community

The consumer surplus for Family A is $.

The consumer surplus for Family B is $.

The annual benefit to the community is $

If the farm imposes the annual limit for each family, the annual benefit to the community is $

Provide your answer to two decimal places and do not include the $ sign.

 

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