1. The Catawba River provides water for communities in two states, North and South Carolina. Suppose...
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1. The Catawba River provides water for communities in two states, North and South Carolina. Suppose that 110 (MAF) of water from the river are available for use. Marginal willingness to pay for water in North Carolina is 3000-4wn, where WN denotes North Carolina's water withdrawals in million acre-feet (MAF). The marginal cost of withdrawing water from the river in North Carolina is constant at $2700 per acre-foot, so marginal net benefits of water for North Carolina are 300-4wN. Marginal willingness to pay for water in South Carolina is 1200-6ws, where ws denotes South Carolina's water withdrawals in MAF. The marginal cost of withdrawing water from the river in South Carolina is constant at $1050 per acre-foot, so marginal net benefits for South Carolina are 150-6ws. Aggregate marginal net benefits for both Carolinas are thus equal to North Carolina's for marginal net benefits between $150 and $300 per acre-foot and MNB = 240-2.4W (where W = WN+ws) for marginal net benefits between zero and $150 per acre-foot. a) Graph North Carolina's, South Carolina's and Carolina aggregate marginal net benefits for Catawba River water. (Use the same X values for all three marginal net benefits functions.) b) Find the scarcity value of water when 110 MAF are available. What does the scarcity value indicate about rivalry (congestion) between North and South Carolina's uses of Catawba River water? c) Find the amount of water used by each state if water is allocated efficiently under the conditions in part (b). d) Suppose that North Carolina has been experiencing significant population growth that increases its marginal net benefits of water to 390-4wn while net benefits in South Carolina remain the same, so that aggregate marginal net benefits for both Carolinas is equal to North Carolina's for marginal net benefits between $150 and $390 per acre-foot and MNB = 294-2.4W for marginal net benefits between zero and $150 per acre-foot. Copy the worksheet from parts (a)-(c) onto a new worksheet. In that new worksheet, graph North Carolina's, South Carolina's and Carolina aggregate marginal net benefits for Catawba River water under these new conditions. e) Find the scarcity value of water when 110 MAF are available. What does the scarcity value indicate about rivalry (congestion) between North and South Carolina's uses of Catawba River water? f) Find the amount of water used by each state if water is allocated efficiently under the conditions in part (d). g) Calculate the difference in efficient water use by each state and by both states combined between part (c) and part (f). 1. The Catawba River provides water for communities in two states, North and South Carolina. Suppose that 110 (MAF) of water from the river are available for use. Marginal willingness to pay for water in North Carolina is 3000-4wn, where WN denotes North Carolina's water withdrawals in million acre-feet (MAF). The marginal cost of withdrawing water from the river in North Carolina is constant at $2700 per acre-foot, so marginal net benefits of water for North Carolina are 300-4wN. Marginal willingness to pay for water in South Carolina is 1200-6ws, where ws denotes South Carolina's water withdrawals in MAF. The marginal cost of withdrawing water from the river in South Carolina is constant at $1050 per acre-foot, so marginal net benefits for South Carolina are 150-6ws. Aggregate marginal net benefits for both Carolinas are thus equal to North Carolina's for marginal net benefits between $150 and $300 per acre-foot and MNB = 240-2.4W (where W = WN+ws) for marginal net benefits between zero and $150 per acre-foot. a) Graph North Carolina's, South Carolina's and Carolina aggregate marginal net benefits for Catawba River water. (Use the same X values for all three marginal net benefits functions.) b) Find the scarcity value of water when 110 MAF are available. What does the scarcity value indicate about rivalry (congestion) between North and South Carolina's uses of Catawba River water? c) Find the amount of water used by each state if water is allocated efficiently under the conditions in part (b). d) Suppose that North Carolina has been experiencing significant population growth that increases its marginal net benefits of water to 390-4wn while net benefits in South Carolina remain the same, so that aggregate marginal net benefits for both Carolinas is equal to North Carolina's for marginal net benefits between $150 and $390 per acre-foot and MNB = 294-2.4W for marginal net benefits between zero and $150 per acre-foot. Copy the worksheet from parts (a)-(c) onto a new worksheet. In that new worksheet, graph North Carolina's, South Carolina's and Carolina aggregate marginal net benefits for Catawba River water under these new conditions. e) Find the scarcity value of water when 110 MAF are available. What does the scarcity value indicate about rivalry (congestion) between North and South Carolina's uses of Catawba River water? f) Find the amount of water used by each state if water is allocated efficiently under the conditions in part (d). g) Calculate the difference in efficient water use by each state and by both states combined between part (c) and part (f).
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a Heres the graph of North Carolinas MNBN South Carolinas MNBS and Carolinas aggregate MNB marginal net benefits for Catawba River water imagepng b The scarcity value of water is the value of the last ... View the full answer
Related Book For
Managerial Economics and Strategy
ISBN: 978-0321566447
1st edition
Authors: Jeffrey M. Perloff, James A. Brander
Posted Date:
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