There are 2 competing users for stream water, user a and user b. the wtp for water for a is p=10-qa, and for b it's p=15-2qb, where q is the quantity of water demanded. the two users have different marginal costs of extraction for water, mca=2, while mcb=3.

a. compute the marginal net benefit (mnb) of water consumption for each user.
b. what is the optimal allocation of water when the water supply is s=15?
c. what is the surplus to each user for the optimal allocation?
d. what is the optimal allocation when s=10?
e. draw a picture of the previous solution.

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1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

answer; balance sheets;

answer; capital structure decision;