A new supply-shifting policy of the state will have three direct effects in a specific river basin experiencing scarcity: • Supply will be shifted rightward for Upriver City; the net benefits of this shift to all of the city's water users has been estimated to be $5 million. The additional water use will result in the production of an added $2 million in output (market value). With a conservatively estimated multiplier of 2.3, secondary economic effects will amount to $4.6 million in the city. Supply will be shifted leftward for Downriver Irrigation District; the properly measured net "benefits" of this shift across all district irrigators is -$2 million. The value of farm output will be lowered by $1 million in the district. The secondary effects multiplier for the farm sector is 2.5. Between the city and the district is a river segment which will suffer some environmental degradation as a result of decreased flow. Some of these losses have been completely valued at $500,000. The remaining losses have not been valued. Is this a desirable policy for the river basin?

A new supply-shifting policy of the state will have three direct effects in a specific river basin experiencing scarcity: • Supply will be shifted rightward for Upriver City; the net benefits of this shift to all of the city's water users has been estimated to be $5 million. The additional water use will result in the production of an added $2 million in output (market value). With a conservatively estimated multiplier of 2.3, secondary economic effects will amount to $4.6 million in the city. Supply will be shifted leftward for Downriver Irrigation District; the properly measured net "benefits" of this shift across all district irrigators is -$2 million. The value of farm output will be lowered by $1 million in the district. The secondary effects multiplier for the farm sector is 2.5. Between the city and the district is a river segment which will suffer some environmental degradation as a result of decreased flow. Some of these losses have been completely valued at $500,000. The remaining losses have not been valued. Is this a desirable policy for the river basin?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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