. A) why do cities expand thier water supply? (use supply and demand to explain
ID: 1104670 • Letter: #
Question
. A) why do cities expand thier water supply? (use supply and demand to explain why) B) By accessing water from more distant locations, what does this do to the marginal cost of water as the amount of water supplied increases? C) In the case of New York, explain why purchaseing land (and paying farmersto keep cows away from rivers) in the Catskills was chosen over building a mordern water-treatment plant. D) Using supply and demand for different quantities of water, explain the advantages of using the green-capital approach of buying land in the Catskills over using grey-capital approach of a water treatment plant. (Hint: the demand would be the same in both alternatives, but supply would be different)
Explanation / Answer
a. Water is a basic necessity and there is always demand for it which increases during summer months. Thus, cities and the administration needs to ensure that adequate amount of water supply is available to people. Thus, cities expand their water supply.
b. As the water is accessed from more distant locations, the marginal cost of accessing water increases. It adds to the cost of production and thus increases overall cost of accessing water.
c. This is because water is a basic necessity and cannot be charged high and as mentioned in part b expanding supply leads to increase in marginal cost of production. This reduces profit of the firm and thus it is better to buy land over building a water treatment plant.
d. Since supply of water is more, it reduces price of water and thus reduces overall profit. Supply of land is limited and thus price is also high. It increases profits and thus buying land is better.
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