Table 17-8 For a Certain Small Town, the Table Shows the Demand

question 243

Multiple Choice

Table 17-8
For a certain small town, the table shows the demand schedule for water. Assume the marginal cost of supplying water is constant at $4 per bottle and there are no other costs.
-Refer to Table 17-8. If there were many suppliers of bottled water, what would be the price and quantity?

• A)The price would be $6 per gallon and the quantity would be 800 gallons.
• B)The price would be $5 per gallon and the quantity would be 1000 gallons.
• C)The price would be $4 per gallon and the quantity would be 1200 gallons.
• D)The price would be $3 per gallon and the quantity would be 1400 gallons.

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Definitions:

Capital Leases

Leases that are recognized as asset purchases for accounting purposes, where the lessee gains ownership rights of the leased asset at the end of the lease term.

Lease Expense

The cost incurred from leasing an asset, including both fixed payments and variable charges over the lease term.

Leveraged Lease

A lease agreement that involves a lessor financing the leased asset through borrowing, with the lease payments covering the loan repayments and providing profit.

Direct Financing Lease

A lease agreement where the lessor records the present value of lease payments as a receivable rather than as a sale or lease revenue.