Question

In the city of New Dork, there are two water users: A church, and a beer brewery (which, coincidentally so, are located adjacent to one another). The marginal net benefit for water usage by the church is $4,000 per 100,000 gallons, and the marginal net benefit for water usage by the brewery is $500 per 100,000 gallons. If 500,000 gallons of water was transferred from the brewery to the church, the total net benefit from this transfer would be: a. $22,500 b. $17,500 c. $1.75 million d. $3,500 e. none of the above

Answer 1

Total net benefit for 10000 gallons = $4000+$500 = $4500

Net benefit for 50000 gallons = $4500*5 = $22500

Therefore (a) $22500 is the answer to this question