For Questions Refer to the Following Information:
a $$P = 24 - 0.0004 Q _ { d }$$

question 36

Multiple Choice

For Questions refer to the following information:
A municipal water utility employs quasi-fixed capital inputs-are the water treatment plant and distribution lines to homes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is $$P = 24 - 0.0004 Q _ { d }$$ .
-Two-part pricing is a desirable method of pricing water because

• A) it is more profitable for the utility company than average-cost-pricing (i.e., second-best pricing).
• B) deadweight loss is zero.
• C) the deadweight loss is paid for by the users of water.
• D) it easy to implement in practice.
• E) both a and d

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Definitions:

Logarithm

The exponent or power to which a base number must be raised to produce a given number.

Logarithmic Equation

An equation involving logarithms, where the variable is located within the logarithm.

Logarithm

A logarithm is the power to which a number, called the base, must be raised to produce a given number.

Fraction

A numerical quantity that is not whole, representing a part of a whole.