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Business, 01.12.2021 04:30 elenasoaita

Demand for water from the Sacramento River Basin (SRB) is given by inverse demand curve P = 5000 – 0.001Q where Q is in acre-feet of water. (An acre-foot of water is enough water to cover one acre of land, one foot deep in water ~ 300,000 gallons) The marginal cost of pumping from the SRB is $200/acre-foot up until the maximum amount that can be pumped. (a) Initially, we have several wet years such that as much water can be taken from the Sacramento Rive r as desired. If the government want the welfare-maximizing amount of water to be drawn from the river, what price should it set and how much will be pumped?

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