What is the first-best allocation of water

Reference no: EM133614571

Problem: Arrakis is a planet without much water. There are two uses for water: consumption by local inhabitants, which creates local utility u(w) = 8w - 1 2 w2 for w units of water, and spice mining, which creates profits π(w) = 4w - 1 2 w2. (I) Suppose that we care equally about utility and profits and that there is a total of w = 4 units of water on Arrakis. What is the first-best allocation of water? (II) What is the first-best allocation of water if w = 10?

Reference no: EM133614571

Questions Cloud

What are the discounts an example of : Which represents the interests of senior citizens and advocates for policies that benefit them. What are these discounts an example of?

How might an increase in the national debt potentially lead : Explain the logic of this argument. How might an increase in the national debt potentially lead to an increase in inflation in the long-run? Explain.

What is the objection to the economic models claim : what is objection to economic model's claim that businesses' environmental responsibility is to maximize profit within law because this maximize social utility?

What is the marginal revenue product per hour from adding : Suppose that hiring a third worker at the campus coffee shop increases output. What is the marginal revenue product per hour from adding that third worker?

What is the first-best allocation of water : Suppose that we care equally about utility and profits and that there is a total of w = 4 units of water on Arrakis. What is the first-best allocation of water?

Why a multinational corporation that is operating a facility : Why should a multinational corporation that is operating facility or factory in poor undeveloped country pay adequate wages rather than paying the wage possible

Lead and manage organisational change : BSBLDR601 Lead and manage organisational change - lead and manage organisational change. The assessment activities are mentioned within the assessment task

What is likely to happen to the market equilibrium : If a new study reveals health benefits associated with consuming dark chocolate, what is likely to happen to the market equilibrium?

Why it doubtful that arvid will ever realize economic profit : Why is it doubtful that Arvid will ever realize these same significant long run economic profits in the future for his rice farm?

User Account

All Pages