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 .

-The price and output of water that maximize social surplus are _____ and _____, respectively.

Question

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  .
 
-The price and output of water that maximize social surplus are _____ and _____, respectively.

Quizplus · Accepted Answer

The price and output that maximize social surplus are determined by the intersection of the supply and demand curves, which represents the equilibrium price and quantity. Without specific supply and demand curves provided, it's not possible to give a detailed explanation. However, the principle is that at the equilibrium, social surplus (the sum of consumer and producer surplus) is maximized. Assuming option C reflects this equilibrium, it would be the correct choice.

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