1. Assume there are two competing uses, municipal and agricultural, for a fixed amount of water Q= Qm + Qa = 100 acre-feet. The water demand curve for municipal use is given by P = 100-2Qm and for agricultural use P = 50-0.5Qa. Because of the way water rights have been allocated in the past, the city is currently consuming m = 10 acre-feet of water while irrigators are applying Qa = 90 acre-feet of water to farms. (a) Under the current allocation, what are the marginal and total values of water for municipal use? What are the marginal and total values of water for agricultural use? (b) Suppose that the cost per acre-foot of delivering water to the two uses is the same. If we reallocate 1 acre-foot of water from agriculture to the city, what is the net gain? Find the efficient allocation for the two uses. (c) (d) Under the efficient allocation, what are the marginal and total value of water for municipal use? What are the marginal and total value of water for agricultural use? What is the total net gain compared to the current allocation? (e) When the agricultural sector sells water to the municipal sector to achieve the efficient allocation, which price range will benefit both sectors?

1. Assume there are two competing uses, municipal and agricultural, for a fixed amount of water Q= Qm + Qa = 100 acre-feet. The water demand curve for municipal use is given by P = 100-2Qm and for agricultural use P = 50-0.5Qa. Because of the way water rights have been allocated in the past, the city is currently consuming m = 10 acre-feet of water while irrigators are applying Qa = 90 acre-feet of water to farms. (a) Under the current allocation, what are the marginal and total values of water for municipal use? What are the marginal and total values of water for agricultural use? (b) Suppose that the cost per acre-foot of delivering water to the two uses is the same. If we reallocate 1 acre-foot of water from agriculture to the city, what is the net gain? Find the efficient allocation for the two uses. (c) (d) Under the efficient allocation, what are the marginal and total value of water for municipal use? What are the marginal and total value of water for agricultural use? What is the total net gain compared to the current allocation? (e) When the agricultural sector sells water to the municipal sector to achieve the efficient allocation, which price range will benefit both sectors?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1.
Assume there are two competing uses, municipal and agricultural, for a fixed amount
of water Q = Qm + Qa = 100 acre-feet. The water demand curve for municipal use is given by
100- 2Qm and for agricultural use P = 50-0.5Qa. Because of the way water rights have been
allocated in the past, the city is currently consuming Qm
applying Qa = 90 acre-feet of water to farms.
(a)
municipal use? What are the marginal and total values of water for agricultural use?
(b)
we reallocate 1 acre-foot of water from agriculture to the city, what is the net gain?
(c)
(d)
municipal use? What are the marginal and total value of water for agricultural use? What is the total
net gain compared to the current allocation?
(e)
allocation, which price range will benefit both sectors?
%3D
%3D
P =
= 10 acre-feet of water while irrigators are
Under the current allocation, what are the marginal and total values of water for
Suppose that the cost per acre-foot of delivering water to the two uses is the same. If
Find the efficient allocation for the two uses.
Under the efficient allocation, what are the marginal and total value of water for
When the agricultural sector sells water to the municipal sector to achieve the efficient

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This is an end-of-chapter problem that I'm struggling with! thanks!
Refer to the diagrams below in which figures (a) and (b) show demand curves reflecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it. If the marginal cost of the optimal quantity of this public good is $6, the optimal quantity must be: $12 10 Alvin (a) 4. 2. 4. $12 10 Elmer 6. 4. (b) 2.
The supply and demand of sugar are given as Qs = 5P, Qd = 250- P where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar. Assuming that sugar is sold in a competitive market, What is the market price? How many tons of paper will be produced per year at that price? What is the efficient output of paper? What is the amount of total Pigouvian tax to achieve efficiency? What is the amount of total Pigouvian subsidy to achieve efficiency?
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