Question

The following table gives hypothetical annual total costs and total benefits of maintaining alternative populations of Asian elephants.

a. Calculate the marginal costs and benefits, and draw marginalbenefit and cost schedules.

b. Given the data, what is the socially optimal world population of Asian elephants?

c. Suppose that two events occur simultaneously. Technological development allows machines to do more efficiently much of the work that elephants once did, which reduces by $\backslash (10$million the marginal benefit of maintaining the elephant population for each $7500$increment in the elephant population. In addition, new techniques for breeding, feeding, and protecting elephants reduce the marginal cost by$\backslash )40$million for each $7500$increment in the elephant population. What is the new socially optimal population of Asian elephants?

Short answer

For part a, we have the equilibrium where marginal cost equals marginal benefit at population $30000$.

For part b, The optimal point is at$30000$elephants.

For part c, $37500$elephants would be the new ideal point.

Step-by-step solution

Step 1:Given Information(Part a)

In the above given table, we have values on population of Asian elephants , total cost and total benefits and in the question, we are asked to find the marginal costs and benefits and draw graph

Step 2:Calulating marginal costs and marginal benefits (Part a) 

Subtracting the preceding cost or benefit yields the marginal cost or benefit.

As illustrated below, calculate the marginal cost and marginal benefit:

Step 3:Answer(Part a)

The table below displays the marginal cost and benefit of Asian elephant conservation.

Step 4:Graph(Part a)

A graph depicting the marginal cost and benefit:

Step 1:Given Information(Part b)

Here , we are asked to find the socially optimal world population of asian elephants.

Step 2:Explanation(Part b)

The optimal point is where the marginal cost and marginal benefit are equal. When the marginal benefit and cost are equal to $25$, this happens with$30000$ elephants.

Step 1:Given Information(Part c)

we are asked to find the new socially optimal population of asian elephants when there is a reduction by $\$10$million the marginal benefit of maintaining the elephant population for each $7,500$increment in the elephant population. and by$\$40$million for each $7,500$increment in the elephant population due to new techniques for breeding, feeding, and protecting elephants .

Step 2:Explanation(Part c)

If the benefit is reduced by $\$10$million and the marginal cost is reduced by$\$40$million for each $7500$elephants, the marginal benefit and marginal cost would be:

Step 3:Answer(Part c)

$37500$elephants would be the new ideal point.