Table 17-6 Imagine a Small Town in Which Only Two Residents, Kunal

question 221

Multiple Choice

Table 17-6
Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero.
The weekly town demand schedule and total revenue schedule for water are shown in the table below.
-Refer to Table 17-6. If the market for water were perfectly competitive instead of monopolistic, how many gallons of water would be produced and sold?

• A)25
• B)100
• C)200
• D)300

---

Definitions:

Market Share

The percentage of an industry's total sales that is earned by a particular company over a specified time period.

Initial Price

The original cost or price of a good or service when it is first offered for sale, often used as a baseline for pricing strategies.

Contribution Margin

The amount remaining from sales revenue after variable costs have been deducted, used to cover fixed costs and contribute to profit.

Machine Hour

A unit of measure representing the operation of a machine for one hour, often used in cost accounting.