Yearly demand for water by residents and businesses in the city of Black Bear Lake is equal to Qo 2000 - 10P where Qo is milons of gallons of water, and P is price. Assume that, due to a drought, the state limits the city to no more than 1800 million gallons of water that it must allocate over a two-year period. The state currently does not charge Black Bear Lake for its water. If the City employs a 5 percent discount rate, how many millions of gallons of water should be allocated during the first period, if the city desires to maximize the net benefits of water consumption over these periods? Answer

Yearly demand for water by residents and businesses in the city of Black Bear Lake is equal to Qo 2000 - 10P where Qo is milons of gallons of water, and P is price. Assume that, due to a drought, the state limits the city to no more than 1800 million gallons of water that it must allocate over a two-year period. The state currently does not charge Black Bear Lake for its water. If the City employs a 5 percent discount rate, how many millions of gallons of water should be allocated during the first period, if the city desires to maximize the net benefits of water consumption over these periods? Answer

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter16: Externalities, The Environment, And Natural Resources

Section: Chapter Questions

Problem 4DQ

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