Let's say California is experiencing a serious drought.
And let's say companies are bottling and selling municipal water from California.
And let's say that the price set by the government for the purchase of this water is low enough that it contributes to consumption levels that exacerbate the water shortage. (I'm not completely sure this part is true, but let's say it is).
Is there a subsidy here?
There is clearly a financial contribution, in the form of the government provision of goods. (I don't buy the argument that a natural resource like water is not a good).
But how do we determine if there is a benefit? What is the market benchmark we should look at to determine whether providing water to these companies at the set price confers a benefit?
Here's some additional information from one of the links above:
Sacramento sells water to a bottler, DS Services of America, at 99 cents for every 748 gallons—the same rate as other commercial and residential customers.
