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

See similar textbooks

Similar questions

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?
Provide a reason why the marginal damages from some emissions may be increasing with the level of emissions (like in the figure above). Suppose the unregulated level of emissions is E3. What area(s) represent the total damages from unregulated emissions? Suppose emissions levels drop from E3 to E1. What area(s) represent the total benefits from the emissions reduction from E3 to E1? What point denotes the marginal damage from emissions at E2?
Parks confer many external benefits on society: open space, trees that reduce pollution, and so on. Therefore, the market equilibrium quantity of parks is not equal to the socially optimal quantity. The following graph shows the demand for parks (their private value), the supply of parks (the private cost of producing them), and the social value of parks, including both the private value and external benefits. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity.
3) The supply and demand of sugar are given as Q. = 5P, Q = 250- P where Q, is tons supplied per year, P is the price per ton; Qa 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, a) What is the market price? How many tons of paper will be produced per year at that price? b) What is the efficient output of paper? c) What is the amount of total Pigouvian tax to achieve efficiency? d) What is the amount of total Pigouvian subsidy to achieve efficiency?
The town of Grayling has 10 thousand residents who produce fish from fish farms and lakes. Each person who works on a fish farm produces 2 fish per day. Each person who fishes in a lake produces 10-X fish per day where X is the number of people (in thousands) who fish in the lakes. If the town issues tradable permits for lake fishing equal to the Pareto efficient value for X, what would a resident pay for one of these permits? (hint: how many extra fish does a lake fisherman catch compared to a fish farmer at the efficient value of X?)
i will 10 upvotes urgent .
No hand written solution Afirm has an industrial plant that emits pollutants into a town’s lake. The plant’s marginal abatement function is MAC= 200 – 0.5E and damages caused by its emissions are given by MD = 2E where emissions are in kg. per day. What is the socially efficient level of emissions from this plant? Illustrate this in a graph. As an incentive to reduce emissions to the socially efficient level, government offers to pay the firm for each kg. of emissions it abates per day from this plant. What subsidy per kg. should the government offer? If the plant abates to the socially efficient level of emissions, what total subsidy payment would the firm receive? Identify the area in your graph. How much better or worse off would the firm be compared to if it did no abating? Identify the area in your graph. What would be the net benefit to society if we pay the firm to reduce the plant’s emissions to the socially efficient level? Identify this area in your graph.
Please all solve the question
2. The PMB associated with a product's consumption is PMB-SMB = 360 - 4Q and the PMC = 6Q. The marginal external damage associated with this good's production is MD=2Q. To correct the externality, the government decides to impose a tax of $T per unit sold. | a) What is the level of production without pollution? b) What is the socially optimal level of production? c) What tax should the government set to achieve the social optimum? d) Explain the difference in the two values in (a) and (b)?
Please, Provide an Explanation for the Ranges/Point in the Follow (Encircled Below in Red. What Do the Ranges/Point Refer To & H They Calculated?) With Z representing the Level of Mitigation (Z): Marshland, MB = 3-Z Dampland, MB=4-2Z Wetland, MB 11-Z The Marginal Cost of Flood Mitigation (MC): MC=2+12Z a. What is the Socially Optimal Level of Z(Zopt)? Answer: From 0-2 MSB = [(3- Z)+(4- 2Z) + (11- Z)] = [(3+ 4+ 11)-(Z+2Z+Z)] = 18-4Z From 2-3 MSB=(3- Z) + (11- Z) = [(3 + 11)-(Z+Z)] = 14-2Z From 3-10-MSB = 11 - Z @11MSB=0