The Economic Way of Thinking 13th Edition by David Prychitko, Peter Boettke, Paul Heyne

Exercise 10

The Sevier River in Utah has been used for about a century to irrigate farmland in central Utah. A 3,000-megawatt, coal-fired electrical generating plant, which would require about 40,000 acre-feet of water per year from the Sevier River, was proposed for this area. Operation of the generating plant would mean less water for agriculture.
(a) Is the water of the Sevier River used more efficiently when it grows
food or when it generates electricity?
(b) Can you answer this question by comparing the value of food with
the value of electricity? ( Hint : Value is determined at the margin.)
(c) If farmers who own rights to Sevier River water sell their rights to the power company, is the water allocated to its most valuable use?
(d) Who are some of the parties who might be adversely affected by the farmers' decisions to sell their water rights?