More than half of all residential water connections in Britain are not metered. Residential customers pay a flat fee regardless of usage. Scottish Water, which supplies water in Scotland, says that it has no evidence that "installation of meters encourages lower than normal usage of water." (Source: "Will switching to a water meter save money?"Guardian, July 8, 2014.)

(a)

Suppose that the Salmond home water supply is not metered, and the family consumes 10,000 gallons a month. Illustrate the family's monthly demand curve for water, assuming that the demand curve is a straight line, and, if the price is 50 per 1,000 gallons, the Salmond family would consume nothing.

(b)

Calculate the total benefit and marginal benefit from water when the Salmond family consumes 10,000 gallons a month. What is the family's buyer surplus?

(c)

Suppose that Scottish Water installs a water meter at the Salmond home and charges a price of 5 per 1,000 gallons. How much water would the family buy and how much would it spend each month?

(d)

What is the maximum that Scottish Water could charge the Salmond family for the consumption in (c)?

(e)

Suppose that, with metering, the Salmonds' neighbors spend more than the Salmond family on water each month. Does this imply that the neighbors get more benefit from water?