Assignment problem: Manitoba is considering preserving a very scenic river. The community has 75 people each of whom has a demand given by q=10-0.2 p where q is the number of miles preserved and p is the price per mile she/he is willing to pay for q miles of preserved river. The marginal cost of preserving the river is $465 per mile.
a. Draw a full-labelled diagram to depict the problem described above
b. How many miles would be preserved in an efficient allocation? Explain your reasoning.
c. Calculate the net benefit of this preservation project? Show this in you diagram. d. How would an increase in the number of people in the community affect the optimal number of miles of the river to be preserved and the net benefits from the project - illustrate this in the diagram in part a.