The market marginal benefit curve for water (measured in thousands of gallons) is MB=300-Q, where Q is thousands of gallons of water. The marginal cost of providing the water (including treatment, pumping, and other costs) is MC=.5Q. Suppose that the government utility regulator has required that the price of water be set at $50 per thousand gallons and that the quantity supplied must be 250 thousand gallons.

 Questions

What is the total benefit of that amount of water to consumers?

What is the total cost of providing that amount of water to producers?

What is the consumer surplus of that amount of water at that price?

What is the net benefit to society (total benefits minus total costs) of that amount of water?

Are net benefits maximized at 250 thousand gallons? If not, how many gallons should be supplied to maximize net benefits?

Answer rating: 100% (QA)

The total benefit of 250 thousand gallons of water to consumers can be found by calculating the area under the marginal benefit curve up to the quanti... View the full answer