1. (30 points) Assume there are two competing uses, municipal and agricultural, for a fixed amount of water Q = km + la = 100 acre-feet. The water demand curve for municipal use is given by P = 100-2Qm and for agricultural use P = 50-0.5Qq. Because of the way water rights have been allocated in the past, the city is currently consuming lm = 10 acre-feet of water while irrigators are applying la = 90 acre-feet of water to farms. (a) (6 points) Under the current allocation, what are the marginal and total values of water for municipal use? What are the marginal and total values of water for agricultural use? (b) (2 points) Suppose that the cost per acre-foot of delivering water to the two uses is the same. If we reallocate 1 acre-foot of water from agriculture to the city, what is the net gain? (C) (10 points) Find the efficient allocation for the two uses. (d) (8 points) Under the efficient allocation, what are the marginal and total value of water for municipal use? What are the marginal and total value of water for agricultural use? What is the total net gain compared to the current allocation? (e) (4 points) When the agricultural sector sells water to the municipal sector to achieve the efficient allocation, which price range will benefit both sectors? 1. (30 points) Assume there are two competing uses, municipal and agricultural, for a fixed amount of water Q = km + la = 100 acre-feet. The water demand curve for municipal use is given by P = 100-2Qm and for agricultural use P = 50-0.5Qq. Because of the way water rights have been allocated in the past, the city is currently consuming lm = 10 acre-feet of water while irrigators are applying la = 90 acre-feet of water to farms. (a) (6 points) Under the current allocation, what are the marginal and total values of water for municipal use? What are the marginal and total values of water for agricultural use? (b) (2 points) Suppose that the cost per acre-foot of delivering water to the two uses is the same. If we reallocate 1 acre-foot of water from agriculture to the city, what is the net gain? (C) (10 points) Find the efficient allocation for the two uses. (d) (8 points) Under the efficient allocation, what are the marginal and total value of water for municipal use? What are the marginal and total value of water for agricultural use? What is the total net gain compared to the current allocation? (e) (4 points) When the agricultural sector sells water to the municipal sector to achieve the efficient allocation, which price range will benefit both sectors