​Table 17-36 the Information in the Table Shows the Total Demand for Demand

question 255

Multiple Choice

​Table 17-36
The information in the table shows the total demand for water service in Takoma. Assume that there are two companies operating in Takoma. Each company that provides these services incurs an annual fixed cost of $400 and that the marginal cost of providing the service to each customer is exactly $2.00. Figures listed are for an annual service contract.
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-​Refer to Table 17-36. If there were only one water service provide in this market, and this single firm maximizes profits, the company will

• A)​sell 500 service contracts and charge a price of $35 for each contract.
• B)​sell 600 service contracts and charge a price of $30 for each contract.
• C)​sell 700 service contracts and charge a price of $25 for each contract.
• D)​sell 800 service contracts and charge a price of $20 for each contract.

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Definitions:

Duopoly

A market structure dominated by two companies, resulting in limited competition.

Demand Curve

A chart depicting how the price of an item correlates with the amount of that item consumers are ready and capable of buying at different price levels.

Marginal Cost

The extra cost involved in producing one more unit of a product or service.

Cartel

An association of independent companies or organizations formed to control production, pricing, and marketing of goods to suppress competition.