Consider a landowner that uses water as a primary input into the production of food. Similar to the problem above, suppose the land has a general production function of f (w) = aw go}, where w is the amount of water applied to the land. Suppose food output receives a price of pf in a perfectly competitive market. 2.A. [1 point] Suppose that water is allocated in a competitive market. Denote the price of water as pm. Derive the landowner 's demand for water. 2.3. [1 point] Suppose now that there are two types of uses for water: cheese and potatoes. Using the parameter values in the Table below, nd the market equilibrium water allocation and price if the amount of water supplied to the market is if; = 9. Cheese Potatoes a: 3 9 b: 1 1 p: 10 2 2.C. [1 point] Now suppose that cheese producer is allocated all the available water supply as a water right. Suppose that the cheese producer can trade any amount of her water rights with the potato farmer, but every unit of water exchanged incurs a cost of d = 12. What is the equilibrium water allocation? 2.D. [1 point] Now suppose that the potato farmer is allocated all the available water supply as a water right. As before, suppose that the potato farmer can trade any amount of her water rights with the cheese producer, but every unit of water exchanged incurs a cost of d = 12. What is the equilibrium water alloca- tion? 2.E. [1 point] What do Parts C and D tell us about the allocation of water rights in the presence of trans- action costs