Assignment:
Four towns share a common water source. By buying open land along the watershed (area from which the water flows) they can preserve its purity from sewage, road runoff, etc.
The land demand schedule for each town based on water treatment costs saved can be expressed as:
P = $34,000 - 10Qd
where Qd is acres purchased, and P is the price the town would be willing to pay.
If the cost of land is $30,000 per acre, how much land will be purchased if each town operates independently? How much if they form a joint commission for land purchases? Show the situation graphically. (If the economic theory is not clear, imagine representatives of the four towns sitting around a table, discussing the costs and benefits of purchasing different amounts of land.)
- Which is the socially efficient solution and why? How would the answers change if the price of land were $36,000 per acre?
- Discuss this in terms of the demand for clean water. Is clean water a public good in this case? Can water generally be considered to be a public good?
Your answer must be, typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.