Table 17-2 Imagine a Small Town in Which Only Two Residents, Abby

question 269

Multiple Choice

Table 17-2
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 17-2. Suppose the town enacts new antitrust laws that prohibit Abby and Brad from operating as a monopoly. What will be the price of water once Abby and Brad reach a Nash equilibrium?

• A)$12
• B)$8
• C)$6
• D)$4

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Definitions:

Measurement Error

The discrepancy between observed values and the true values, possibly due to inaccuracies or variability in measurement.

Pearson Product-moment

A statistical correlation coefficient expressed as a value between -1 and 1, indicating the degree to which two variables are linearly related.

Correlation Coefficient

A measure that determines the degree to which two variables' movements are associated.

True Score

The true score is a theoretical concept in psychometrics representing the actual measure of the trait or characteristic being assessed, without the distortion of measurement error.