Consider two otherwise identical communities; call them P and N. Suppose that in P, all homes, apartments,

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Consider two otherwise identical communities; call them P and N. Suppose that in P, all homes, apartments, and businesses have meters that record the usage of water. In addition, the users of the water must pay more when they use more water. Thus, water is priced like most other goods. In community N, there are no meters and the local supplier of water charges everyone in the community a fixed amount per person, per month for their water service. Thus, using another gallon costs the user nothing additional. In which community will per capita water usage be higher? Explain, using the relevant principles of economics.

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The Economics of Public Issues

ISBN: 978-0134018973

19th edition

Authors: Roger LeRoy Miller, Daniel K. Benjamin, Douglass C. North

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