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

question 499

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. If Rochelle and Alec operate as a profit-maximizing monopoly in the market for water, how many gallons of water will be produced and sold?

• A)0
• B)500
• C)600
• D)1,200

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Definitions:

Opportunity Cost

The cost of what you have to give up in order to choose something else.

Output

The sum of all goods or services created by an enterprise, industry, or the economy over a certain period.

Economic Profits

The profit or loss calculated by taking out both straightforward and assumed expenses from total income.

Purely Competitive

A business environment marked by the proliferation of many small enterprises, a uniform product, and effortless procedures for both entry and exit.