WSP00913

• File Number: 8272.600.60
• Description: Colorado River Basin Salinity Control Program - Basin Member State Info - Utah
• Basin: Colorado Mainstem
• Water Division: 5
• Date: 3/7/1975
• Title: Colorado Regional Assessment Study - Phase One Report for the National Commission on Water Quality - Part 2 of 2 -- Chapter VI - end
• Water Supply Pro - Doc Type: Report/Study

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diminishing returns. He will also experience diminishing returns to other

2 2 2
inputs (0 PX/oK < 0, 0 PX/oN < 0, 0 PX/oL < 0). However, there

is no reason to assume that in going frolp one combination of inputs to

another combination in which all inputs increase that production will

decrease (that is, returns to scale may be increasing, constant, or

decreasing).

Now, assume that all production functions can be aggregated into

a subbasin (or regional, basin, or national) level, so that we have a

total output or total willingness to pay function, TWP. (Note that the

relationship now is between output and willingness to pay by consumers.

Diminishing a price of output is expected as output is increased in the

aggregate. )

Assume that TCP is the aggregate cost function for the region.

Private output is than at X (where TWP-TC is maximized). If exter-
p p

nal costs (costs not borne by the producer) plus private costs are in-

eluded, TC , then net social product is maximized at X , and the
~e ~e
external cost to society of producing at X is AB. Note that net
. p
social product is BC. If external costs plus private costs are TC ,
p+e
then producing X has a social cost of BD, and a net social loss of CD.
- P

Public action to reduce production to the social optimum (X or
p+e
X + ,) is required. The action will assumably cause each producer to
p e
reduce his production by the amount of his addition to social cost.

That is, his Pw, for example, will be augmented to include external

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