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

question 235

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. Suppose the town enacts new antitrust laws that prohibit Kunal and Naj from operating as a monopolist. Once the Nash equilibrium is reached, how much profit will each producer earn?

• A)$400.00
• B)$437.50
• C)$450.00
• D)$800.00

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Definitions:

Operating Lease

A contract that allows for the use of an asset but does not convey rights of ownership of the asset.

Assets And Liabilities

Represent the resources a company owns or controls (assets) and the obligations it owes to outsiders (liabilities).

Operating Lease

A lease agreement for the use of an asset where the lessor remains the owner, and the lessee does not record the asset on its balance sheet.

Depreciation Expense

An accounting method of allocating the cost of a tangible asset over its useful life to account for declines in value over time.