Question

Early settlers in the town of Dry Gulch drilled wells to pump as much water as they wanted from the single aquifer beneath the town. (An aquifer is an underground body of water.) As more people settled in Dry Gulch, the aquifer level fell and new wells had to be drilled deeper at higher cost.Residents of Dry Gulch have a private incentive to ____ water because _____
A. over use; external costs aren't considered.B. under use; it is a scarce resource.C. over use; it is a scarce resource.D. under use; it is characterized by increasing marginal costs.

Answer 1

Answer: B. under use; it is a scarce resource.

Explanation:

Early settlers in the town of Dry Gulch drilled wells to pump as much water as they wanted from the single aquifer beneath the town. (An aquifer is an underground body of water.) As more people settled in Dry Gulch, the aquifer level fell and new wells had to be drilled deeper at higher cost.Residents of Dry Gulch have a private incentive to under use water because it is a scarce resource.