Most cities own the water system that provides water to homes and businesses Som

Question

Most cities own the water system that provides water to homes and businesses Some cities charge a fat monthy fee, while other oities charge by the galion. Which method of pricing lis more likely to result in economic eficiency in the water marker? Engli Eoonomic efficiency is more likely to result in the water market if oities charge O A by the gallon because homes and businesses will not consume galons of water for which marginal beneft is greater than price O B. by the gallon because homes and businesses will not consume galons of water for which marginal benefit is less than price C. a flat monthiy foe because homes and busnesses will only consume gallons of water tor which marginal benenta gener than price D. by the gallon because tho price of consuming addsonal water to homes and businesses wil be Ower rartthe city charged a nat monthly ne OE. anat monthly fee because the pnoe of oonsumng an additional unit of water to homes and bar esses wi.-the margnal ool dprdyte Why do you think the same method of pricing isnt used by all cities? 0 A. OB. Cities have different marginal costs of providing water. Cities are unaware of which prong system is more ikely to resut in economic of ciency c·caes know their marginal cost of providing water O D. Cities are price takers in the water market 0 E. Both a and b.

Explanation / Answer

41. Economic efficiency is more likely to result in the water market if cities charge
b) by the gallon because homes and busineeses will not consume gallons of water for which marginal benefit is less than price.

Why do you think the same method of pricing isn't used by all cities?
e) both a and b
Cities will have different marginal costs of providing water and they are unaware of which pricing system is more likely to result in economic efficiency.

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