Yearly demand for water by residents and businesses in the city of Black Bear Lake is equal to Qo 2000 - 10P where Qo 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, how many millions of gallons of water should be allocated during the first period, if the city desires to maximize the net benefits of water consumption over these periods?

Yearly demand for water by residents and businesses in the city of Black Bear Lake is equal to Qo 2000 - 10P where Qo 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, how many millions of gallons of water should be allocated during the first period, if the city desires to maximize the net benefits of water consumption over these periods?

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter4: Supply And Demand: An Initial Look

Section: Chapter Questions

Problem 3TY

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