The Bureau of Reclamation is an agency of the U.S. government that manages many dams in the western United States. The water from its dams is used for irrigating agriculture. Let's assume that the Bureau is deciding what size dam to build. The water yield, which we will assume will sell at a fixed price P per unit to the farmers, increases linearly with the size of the dam. Let's assume as well that the costs, as a function of water yield, are U-shaped. Historically, the Bureau has been required to recover its costs rather than maximize profits in its water pricing. Recovering its costs means that it must set its prices so that its revenues exactly equal its costs. Draw a U-shaped cost curve and a downward-sloping demand curve. Use this diagram to find the amount of water that the Bureau will produce. Compare it to the amount that a profit-maximizing, price-taking firm would produce. What is the opportunity cost to the federal government of this policy? In other words, if the Bureau maximized profits rather than recovered costs, what could it do with the additional money?