In 1985 a Desert Community Stopped Pumping Water from a 1000

question 71

Multiple Choice

In 1985 a desert community stopped pumping water from a 1000 foot well because it had run dry. In 2005 the price of water doubled. The community then drilled the well deeper and started pumping again. In this community,

• A)the supply of water is perfectly inelastic because it is a finite resource.
• B)water production is characterized by increasing opportunity costs.
• C)markets cannot reach equilibrium because there is a persistent shortage of water.
• D)higher water prices can reduce quantity demanded but cannot increase quantity supplied.

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