Table 17-1 Imagine a Small Town in Which Only Two Residents,Abby and Residents,Abby

question 129

Multiple Choice

Table 17-1
Imagine a small town in which only two residents,Abby and Brad,own wells that produce safe drinking water.Each week Abby and Brad work together to decide how many gallons of water to pump.They bring water to town and sell it at whatever price the market will bear.To keep things simple,suppose that Abby and Brad can pump as much water as they want without cost so that the marginal cost is zero.The weekly town demand schedule and total revenue schedule for water is shown in the table below:

-Refer to Table 17-1.Suppose that Abby and Brad work together in order to operate as a profit-maximizing monopolist.What price will they charge for water?

• A) $8
• B) $7
• C) $6
• D) $4

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Definitions:

Pure Competition

A market structure characterized by a large number of small firms, a homogeneous product, complete information, and free entry and exit, leading to price taking behavior.

Commodity Products

Goods that are interchangeable with others of the same type and are usually sold based on price rather than brand or differentiation.

Monopolistic Competition

Monopolistic competition is a market structure characterized by many sellers offering differentiated products or services, leading to a competitive environment where companies have some price-making power.

Tracking Device

A tracking device is a technology designed to monitor and report the location or movement of an object, vehicle, or individual, using GPS or other means.