Use the Information Below to Answer the Following Questions

question 24

Multiple Choice

Use the information below to answer the following questions.
Fact 13.5.1
Cascade Springs Inc. is a natural monopoly that bottles water from a spring high in the Rocky Mountains. The total fixed cost it incurs is $80,000, and its marginal cost is 10 cents a bottle. The demand curve for Cascade Springs bottled water is shown in the following figure:

Figure 13.5.1
-Refer to Figure 13.5.1. Suppose the industry is unregulated. In this case, output is

• A)400,000 bottles per year.
• B)450,000 bottles per year.
• C)600,000 bottles per year.
• D)700,000 bottles per year.
• E)800,000 bottles per year.

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Definitions:

Opportunity Cost

Surrendering the chance for gains from other choices by opting for one path.

Machinery

Equipment, especially of a mechanical nature, used in the production process of goods.

Petroleum

A liquid that occurs naturally under the surface of the Earth, which can be processed into fuel and a range of chemical products.

Labor Productivity

A measure of economic performance calculated by dividing total output by the total number of hours worked.