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

question 81

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. How many gallons of water will be produced and sold once Rochelle and Alec reach a Nash equilibrium?

• A)600
• B)700
• C)800
• D)900

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Definitions:

Independent Variables

The variables manipulated or changed in an experiment to explore their effects on the dependent variable.

Interactive Effects

The combined effects of two or more independent variables on a dependent variable that are not simply additive.

Between-Groups Design

An experimental design where different groups of participants are exposed to different treatments or conditions and compared.

Random Assignment

The process of allocating participants or units in a study to different groups purely by chance, minimizing pre-existing differences between the groups.