I mostly need help with part (c). For part (b), I calculated $640,000 as my answ

Question

I mostly need help with part (c). For part (b), I calculated $640,000 as my answer, but I'm not 100% sure if that is correct or not so an explanation on part (c) and a check on my answer for part (b) would be great. Thanks in advance!

City Parks: A city's mayor has to decide how much money to spend on parks and recreation. City codes restrict this spending to no more than 5% of the budget, and the yearly budget of the city is dollar 20,000,000. The mayor wants to please his constituents, who have diminishing returns from parks. The money- equivalent benefit from spending dollar c on parks is . What is the action set for the city's mayor? How much should the mayor spend? The movie An Inconvenient Truth has shifted public opinion, and now people are more willing to pay for parks. The new preferences of the people are given by . What now is the action set for the mayor, and how much spending should he choose to cater to his constituents?

Explanation / Answer

I assume you took the derivative (calculated the marginal benefit) and set it equal to zero, solving for c=640,000.

That makes sense to me that the city would spend up to the point where the marginal benefit becomes negative.

If you now do the same thing with the new equation, you get a equilibrium level that is over 1,000,000. Since that is the maximum that can be legally spent,I believe you would spend 1,000,000.

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