Yearly demand for water by residents and businesses in the city of Black Bear Lake is equal to Qp=2000-10P %3D where Qp is millions of gallons of water, and P is price. Assume that, due to a drought, the state limits the city to no more than 1800 million gallons of water that it must allocate over a two-year period. The state currently does not charge Black Bear Lake for its water. If the City employs a 5 percent discount rate to determine the intertermporal allocation that maximizes net benefit, what price should it charge per million of gallons of water consumed during the first period, if it wants the market to solve this rationing problem? Please do not use a $ sign. Please round your answer to the nearest penny.
Yearly demand for water by residents and businesses in the city of Black Bear Lake is equal to Qp=2000-10P %3D where Qp is millions of gallons of water, and P is price. Assume that, due to a drought, the state limits the city to no more than 1800 million gallons of water that it must allocate over a two-year period. The state currently does not charge Black Bear Lake for its water. If the City employs a 5 percent discount rate to determine the intertermporal allocation that maximizes net benefit, what price should it charge per million of gallons of water consumed during the first period, if it wants the market to solve this rationing problem? Please do not use a $ sign. Please round your answer to the nearest penny.
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter16: Externalities, The Environment, And Natural Resources
Section: Chapter Questions
Problem 4DQ
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