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

question 87

Multiple Choice

Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The town's weekly demand schedule and total revenue schedule for water is shown in the table below:
-Refer to Table 17-1. Suppose the town enacts new antitrust laws that prohibit Rochelle and Alec from operating as a monopoly. What will be the price of water once Rochelle and Alec reach a Nash equilibrium?

• A)$15
• B)$20
• C)$25
• D)$30

---

Definitions:

Company's Management

The group of individuals who operate at various levels within a company and are responsible for making decisions, implementing strategies, and running day-to-day operations.

Interest Receivable

An accounting term referring to the interest income that has been earned but not yet received in cash.

Interest Revenue

Income earned from lending funds or investing in interest-bearing financial assets.

Retained Earnings

The portion of a company's profit that is held or retained and not paid out as dividends to shareholders, used for reinvestment in the business, to pay debt, or to buy back shares.