The study examines the multiproduct nature of water supply relative to economies of scale and scope. The water utility is viewed as a multiproduct firm providing residential and nonresidential services with spatial variation. There are no significant economies of scale in the utility's overall operation. The utility, however, enjoys considerable economies for nonresidential water supply but suffers from diseconomies in residential supply. The economies of scale achieved in water treatment are mostly lost in the distribution of water. The utility on the whole experiences economies of scope associated with joint production of the two services. Furthermore, water utilities have no perceptible tendency to behave as a natural monopoly. (Copyright (c) 1988, Elsevier Science Publishers B.V. (North-Holland).)