An underground aquifer in a developing country is available to all farms in a small community. It costs 50 dollars per farm per day to operate a pump that can extract groundwater from the aquifer. The value that a farm can obtain by using or selling the water depends on how many farms extract water. Assuming there is no regulation of the aquifer, how many farms will extract groundwater? $160 $140 $120 $100 $60 500 $40 120 10 1 2 3 4 1 6 7 Number of Farms Extracting Groundwater 0 Marginal Social Cost 9 Marginal Private Cost Marginal Private Benefit 10 Number of Farms Marginal Private Marginal Social Marginal Private Extracting Water 1 2 3 4 5 6 7 8 9 10 Benefit 100 100 100 90 80 70 60 50 40 30 Cost 50 50 50 90 100 110 120 130 140 150 Cost 50 50 50 50 50 50 50 50 50 50

An underground aquifer in a developing country is available to all farms in a small community. It costs 50 dollars per farm per day to operate a pump that can extract groundwater from the aquifer. The value that a farm can obtain by using or selling the water depends on how many farms extract water. Assuming there is no regulation of the aquifer, how many farms will extract groundwater? $160 $140 $120 $100 $60 500 $40 120 10 1 2 3 4 1 6 7 Number of Farms Extracting Groundwater 0 Marginal Social Cost 9 Marginal Private Cost Marginal Private Benefit 10 Number of Farms Marginal Private Marginal Social Marginal Private Extracting Water 1 2 3 4 5 6 7 8 9 10 Benefit 100 100 100 90 80 70 60 50 40 30 Cost 50 50 50 90 100 110 120 130 140 150 Cost 50 50 50 50 50 50 50 50 50 50

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter14: Environmental Economics

Section: Chapter Questions

Problem 1SQP

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Question

An underground aquifer in a developing country is available to all farms in a small community. It
costs 50 dollars per farm per day to operate a pump that can extract groundwater from the
aquifer. The value that a farm can obtain by using or selling the water depends on how many
farms extract water.
Assuming there is no regulation of the aquifer, how many farms will extract groundwater?
$160
$140
$120
$100
500
500
$40
1:20
50
2
3
6
Number of Farms Extracting Groundwater
.
Marginal
Social Cost
Marginal Private
Cost
Marginal Private
Benefit
10
Number of Farms Marginal Private Marginal Social Marginal Private
Extracting Water
1
2
3
4
5
6
7
8
9
10
Benefit
100
100
100
90
80
70
60
50
40
30
Cost
50
50
50
90
100
110
120
130
140
150
Cost
50
50
UN 50
50
50
50
50
50
50
50

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