Question

The following table displays hypothetical annual total costs and total benefits of conserving wild tigers at several possible worldwide tiger population levels.

a. Calculate the marginal costs and benefits.

b. Given the data, what is the socially optimal world population of wild tigers?

c. Suppose that tiger farming is legalized and that this has the effect of reducing the marginal cost of tiger conservation by$\$15$million for each $2000$tiger population increment in the table. What is the new socially optimal population of wild tigers?

Short answer

For part a, we have the equilibrium where marginal cost equals marginal benefit at population of $8000$.

For part b, The optimal point is at$8000$tigers.

For part c, $10000$tigers 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 wild tigers, total cost and total benefits and in the question, we are asked to find the marginal costs and benefits.

Step 2:Calulating marginal costs(Part a)

Marginal cost or benefit is derived by subtracting the consecutive cost or benefit.

Step 2:Calulating marginal benefits(Part a)

Upon calculation, determine that at population of $8000$, we have the equilibrium, as marginal cost equals marginal benefit.

Step 1:Given Information(Part b)

Here , we are asked to find the socially optimal world population of wild tigers.

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 $8000$tigers.

Step 1:Given Information(Part c)

we are asked to find the new socially optimal population of wild tigers when there is a reduction of the marginal cost of tiger conservation by$\$15$million for each $2000$tiger population increment in the table.

Step 2:Explanation(Part c)

If the cost per tiger drops by a million dollars, the marginal cost for $2000$tigers drops by$\$15$ million. The new table will look like this:

Step 3:Answer(Part c)

The new optimal point would be $10000$tigers.