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Unformatted text preview: terms of increased crop production and revenue, of each gallon of water is 1 peso. Calculate the total daily revenue (TR = output times value) for each number (N) of wells operating. b. If each well is privately owned by a different farmer, how many wells will operate? (To calculate this first calculate the average revenue, which is TR/N). Analyze this result in terms of economic efficiency and sustainability. c. What would be the economically efficient number of wells? (To calculate this you will need marginal revenue, which is given by TR/ N.) Show that net social benefit in the present period is maximized at this number of wells. d. How could the socially efficient equilibrium identified in part c be achieved through taxes? In this case is the socially efficient level also ecologically sustainable? e. How would the answers to b, c, and d change if costs fell to 38 dollars per well per day?...
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This note was uploaded on 12/20/2010 for the course AEM 25 at Cornell University (Engineering School).