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?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![3. 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?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F50f8516f-ca69-4754-af99-d30dbf47eb66%2F652958ab-0f92-4fa8-aed3-4d7962f0af6e%2Fwi2fq6p_processed.png&w=3840&q=75)
Transcribed Image Text:3. 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?
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