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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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canada has not allowed for the bulk exportation of water. the current price for water for canadian consumers is $40 per tonne (typically delivered via an underground pipe to your house/business!) and canadians consume 3 m tonnes/yr. unfortunately, climate change has resulted in droughts in california and other southern states. to help meet this need and make a profit of course, canada has decided to allow international trade in water. the north america (or world) price for water is currently $60/tonne. (hint the supply lines does not move….)

Explain in words:-1) what will happen to production (supply) and canadian demand for water. 2) The effect on the producer and consumer surplus. 3) any imports / exports

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