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Read the following excerpt and answer question 3. Money down the drain

Households hit

by sky high power bills have also been silently battling surging water and sewage costs in a double - whammy on their budgets A Herald Sun analysis of 10 years of bureau of Statistics data has found that water and sewerage charges jumped an average 91 per cent since 2007, notfar behind electricity's jump 116 per cent jump. ......

Water economics specialist and Australian National University professorQuentin Grafton said the costs to "drought-proof" cities [by building higher cost desalination plants] had been passed on to customers over the past decade, and authorities had started charging households more for water useabove certain thresholds. ...

Author Anthony Keane

Source: The Herald Sun October 21st, 2017

3. Using the cost diagrams, including drawing a graph, explain, what is happening to costs of the firm. Identify any relevant information provided in the article.

What solution would you recommend to the government to address any equity concerns where poorer households experiencing high water prices (noting that clean water is an important commodity)? Explain your solution carefully. (4 marks) Word count 350.

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