Case Study #2

Prompt: The objective of this case study is to analyze data and make recommendations for the improvement of the water quality in a local lake.Describe the required data and the rationale for using the travel cost method. Prepare your analysis as though you were hired by an influentialassociation of homeowners and businesses that are interested in the local lake’s water quality. The analysis and recommendations you providewill help determine the benefits for improving the water quality of the lake. You must take the steps listed below to complete this case study. Step 1Describe the rationale for using the travel cost method. Compare the travel cost method to the contingent valuation method in yourdescription. Step 2Define the zones surrounding the lake. These may be defined by concentric circles around the lake or by geographic divisions.Choose what makes sense, such as counties or other distinguishable boundaries that surround the lake at different distances. Add agraphic to enhance the definition and description.Step 3Explain how you will collect data. Focus on the number of visitors from each zone and the number of visits made in the last year. Forthis example, assume the staff at the lake has records of the number of visitors and their zip codes. This will be used to calculate thetotal number of visits per zone over the last year. To extend the value of the analysis, explain the value of more precise data andwhat it takes to analyze this additional data. More information on this approach is found on the companion website to the coursetextbook (relevant pages for Chapter 7). Step 4Calculate the visitation rates per 1,000 population in each zone. These are the total visits per year designated by each zone, dividedby the zone’s population in thousands. An example is shown below. Use Microsoft Excel (or something similar) to calculate the ratesthousands. An example is shown below. Use Microsoft Excel (or something similar) to calculate the rates.Visitation Rates per 1,000 PopulationZone Total-0-3Visits/Year-400 allZone-Population Visits/1,0000 400 1,000 4001 400 2,000 2002 400 4,000 1003 400 8,000 50Beyond 3 0Total Visits 1,600Step 5Calculate the average round-trip travel distance and travel time for each zone. Assume that people in Zone 0 have a travel distanceand time of zero. Every other zone has increasing travel time and distance. Next, using average cost per mile and per hour of traveltime, calculate the travel cost per trip. A standard cost per mile for operating an automobile is readily available from AAA or similarsources. Assume that cost per mile is $.30, or use the current expense rate found on the IRS website. The cost of time is morecomplicated. The simplest approach is to use the average hourly wage. For this example, assume it is $9 per hour (or $.15 perminute) for all zones, although in practice it is likely to differ by zone. Generate calculations using Microsoft Excel or a similarprogram.Average Round-Trip Travel Distance and Travel TimeZone Round-Trip TravelDistanceRound-TripTravel TimeDistance TimesCost/Mile($.30)Travel TimeTimesCost/Minute($.15)TotalTravelCost/Trip0 0 0 0 0 01 20 30 $6 $4.50 $10.502 40 60 $12 $9.00 $21.003 80 120 $24 $18.00 $42.00Step 6For additional practice, add one to two more zones with additional data.To estimate using regression analysis, use an equation that relates visits per capita to travel costs and other important variables.From this, estimate the demand function for the average visitor. In this simple model, the analysis might include demographicvariables, such as age, income, gender, and education levels, using the average values for each zone. To maintain the simplestpossible model, calculate the equation with only the travel cost and visits/1,000.Visits/1,000 = 330 – 7.755*(Travel Cost)Step 7Construct the demand function for visits to the lake, using the results of the regression analysis. The first point on the demand curveis the total visitors to the lake at current access costs (assuming there is no entry fee for the lake), which in this example is 1,600visits per year. The other points are found by estimating the number of visitors with different hypothetical entrance fees (assumingthat an entrance fee is viewed in the same way as travel costs). Enter the total number of visits.Demand FunctionZone Travel Cost plus$10Visits/1,000 Population Total Visits0 $10 252 1,000 2521 $20.50 171 2,000 3422 $31.00 90 4,000 3603 $52.00 0 8,000 0Total VisitsFor additional practice, add one to two more sets of dataThis gives the second point on the demand curve (enter the sum of the total visits into the gray shaded area). Use the total numberof visits and multiply it by an entry fee of $10. Then calculate in the same way for the number of visits at each of the increasing entryfees to get the totals listed below. (Use a program such as Microsoft Excel to enter data and then plot a graph.)Entry Fee Total Visits$20 409$30 129$40 20$50 0This points give the demand curve for trips to the lake Step 8Now estimate the total economic benefit of the lake by calculating the consumer surplus (or the area under the demand curve). Thisresults in a total estimate of economic benefits from the lake uses around $23,000 per year, or around $14.38 per visit($23,000/1,600). Remember that the objective is to determine whether it is worthwhile to spend money to protect the lake by implementing programs to improve the water quality. If the actions cost less than $23,000 per year, the cost will be less than thebenefits provided by the lake. If the costs are greater, the staff will decide whether other factors are worthwhile. You should makerecommendations that will influence a decision on whether it is worthwhile to spend money on programs to improve the waterquality of the lake over the long run and the short run. Also make recommendations on the additional information to gather in asurvey to enhance this study. Create a report with recommendations based on your analysis. Do you need a similar assignment done for you from scratch? We have qualified writers to help you. We assure you an A+ quality paper that is free from plagiarism. Order now for an Amazing Discount! Use Discount Code “Newclient” for a 15% Discount!NB: We do not resell papers. Upon ordering, we do an original paper exclusively for you.
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