Scenario 12.2: Suppose a Stream Is Discovered Whose Water Has Remarkable Healing

question 74

Multiple Choice

Scenario 12.2:
Suppose a stream is discovered whose water has remarkable healing powers. You decide to bottle the liquid and sell it. The market demand curve is linear and is given as follows:
P = 30 - Q
The marginal cost to produce this new drink is $3.
-Refer to Scenario 12.2. What price would this new drink sell for if it sold in a competitive market?

• A) 0
• B) $3
• C) $13.50
• D) $16.50
• E) $27

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Definitions:

Surplus

The amount by which the quantity of a product supplied exceeds the quantity demanded at a specific price, often leading to a decrease in price.

Shortage

A situation where the demand for a product or service exceeds its supply in a market.

Equilibrium Quantity

Equilibrium Quantity is the quantity of goods or services supplied and demanded at the equilibrium price, where the quantity supplied equals the quantity demanded.

Demand and Supply of Wheat

Refers to the quantity of wheat that consumers are willing to purchase at various prices and the quantity that producers are willing to offer for sale, which together determine the market price of wheat.