There is an oil spill and the oil washes up on a beach. The beach is closed for
ID: 1122587 • Letter: T
Question
There is an oil spill and the oil washes up on a beach. The beach is closed for three years due to the rate that the residual oil washes up on the beach and the time it takes to remove the oil. You are tasked with determining the economic damages (lost value) from the oil on the beach. You know demand for the beach before the damage occurred could be predicted by the equation Q = 100,000 - 2,000P, where P is the access fee. You also know that the access fee is $5. Determine the beach value, suggest a reasonable discount rate, and then write out the formula to calculate the damages (you do not need to compute the damages.).
Explanation / Answer
When the economics had not occured the quantity demanded with price $5 would be as follows:-
1,00,000 - 2000(5) = Q
Thus, Q = 90,000 Units
The economics damages for 3 years would be 270000 units as 90,000 units is for one year. I would select the discount rate at 10% for calculating it present worth.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.