Consider a landowner that uses water as a primary input into the production of food. Similar...

 

Transcribed Image Text:

Consider a landowner that uses water as a primary input into the production of food. Similar to the problem above, suppose the land has a general production function of f(w) - aw - w², where w is the amount of water applied to the land. Suppose food output receives a price of p, in a perfectly competitive market. 2.A. [1 point] Suppose that water is allocated in a competitive market. Denote the price of water as pw. Derive the landowner's demand for water. 2.B. [1 point] Suppose now that there are two types of uses for water: cheese and potatoes. Using the parameter values in the Table below, find the market equilibrium water allocation and price if the amount of water supplied to the market is w = 9. a = b= p= = Cheese Potatoes 3 9 1 1 10 2 Consider a landowner that uses water as a primary input into the production of food. Similar to the problem above, suppose the land has a general production function of f(w) - aw - w², where w is the amount of water applied to the land. Suppose food output receives a price of p, in a perfectly competitive market. 2.A. [1 point] Suppose that water is allocated in a competitive market. Denote the price of water as pw. Derive the landowner's demand for water. 2.B. [1 point] Suppose now that there are two types of uses for water: cheese and potatoes. Using the parameter values in the Table below, find the market equilibrium water allocation and price if the amount of water supplied to the market is w = 9. a = b= p= = Cheese Potatoes 3 9 1 1 10 2

Answer rating: 100% (QA)

2A To derive the landowners demand for water we need to determine the quantity of water the landowne... View the full answer