Are Santa Clara Valley Farmers Paying Too Little for Precious Water? The water that irrigates Santa Clara Valley's farms comes dirt cheap for growers, who pay 6 percent of the amount residents in the valley pay for well water. The Santa Clara Valley Water District is debating whether to start charging farmers more. Farmers are pushing back, saying even modest increases to their costs could drive them out of business. Source: The Mercury Nears, May 12, 2019

a. Do you think that the allocation of water between agricultural and residential users is likely to be efficient? Explain your answer.

b. If agricultural users paid a higher price, would the allocation of resources be more efficient?

c. If agricultural users paid a higher price, what would happen to consumer surplus and pro- ducer surplus from water?

d. Is the difference in price paid by agricultural and residential users fair?