Prior Appropriation Rights A river system with two diverters exists with the following properties: The river flow is initially 10 L/s Diverter 1 is located along the river such that he removes water first His diversion works have a capacity of & L/s . Diverter 1 has two farms: o Farm 1A is 100 acres. It produces profit of $5,000 per 25 acres irrigated with 1 L/s water. It returns 0. 5 L/s per 1 L/s used to the river, above the location of diverter 2. o Farm 1B is also 100 acres but is located at a lower point and produces profit of $7,000 per 25 acres with 1 L/'s water. [It also returns 0. 5 L/s per 1 L/s used to the river, but below the location of diverter 2.] o Any section of a farm that does not receive irrigation water produces no profit. . Diverter 2 has a single farm and withdraws water below diverter 1 o Farm 2 is the same as farm 1B. It is 100 acres and produces a profit of $7,000 per 25 acres with 1 L/s water, and a profit of $2,000 without irrigation. Note 1: The factory can only purchase water from diverter 1 . Note 2: Assume water can only be used in 1 L/s chunks (e.g. I can sell 1 L/s or 2 L/s but not 1.5 L/s; I can irrigate 25, 50, 75, or 100 acres but not fractions thereof.)Factory 200 River (10 L/s) Diversion Point 1 Return Farm 1A Flow Farm 1B Diveption Point 2 Return Flow Farm 2 Return Flow1. Assume initially there are only the two farms: a. What amount of irrigated farming occurs under the initial conditions? b. How much profit is earned by farmer 1? c. How much profit is earned by farmer 2? 2. Now, a factory offers to buy 2 L/s of water from diverter 1 to use in the production of solar panels for a price of $8,000 per L/s. a. Will diverter 1 want to sell his water? Why? 3. Assume diverter 2 has a senior water right so that diverter 1 must ensure 2 L/s is put back in the river before diverter 2 receives water: a. What is diverter 1's profit? b. How many acres of each farm does diverter 1 irrigate? c. What is the total profit? d. How does diverter 1 feel about this allocation? 4. Assume diverter 1 has the senior water right so is able to sell the 2 L/s of water to the factory: a. What is diverter 1's profit? b. How many acres of each farm does diverter 1 irrigate? c. What is diverter 2's profit with the 2 L/s leaving the basin? d. How does diverter 2 feel about the out-of-basin transfer to the factory? 5. Contrast the outcomes of questions 3 and 4: a. Which outcome is better for diverter 1? Diverter 2? Combined? b. How would you define a property right so that the combined benefits were always highest