Problem
Villagers in Curdi, India have open access to a groundwater reservoir. As long as an individual is a resident of Curdi, the individual can extract water from the reservoir. All non-residents of Curdi are not allowed to tap into the groundwater reservoir. There is no regulator of the groundwater stock in the village. Is the equilibrium level of water extracted "too much" or "too little" or equal to the social optimum? Explain why this occurs. Support your answer by drawing the private and social marginal cost curves and the marginal benefit curve for extracted water. Identify the deadweight loss area if any exists.