Cost recovery mandate on the water market

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Municipal water supplies are often managed by a government agency. Typically, government agencies are not allowed to ‘make a profit.’ a. Assuming supply and demand behave ‘normally,’ graphically illustrate the implications of a governmental ‘cost recovery’ mandate on the water market. b. Precisely identify the welfare effects of water management under these conditions relative to profit maximization. Use the concepts of Marginal Cost, Marginal Benefit, Average Cost, Average Benefit, Total Cost and Total Benefit in your answer.

Reference no: EM131095985

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