Table 16-3
Imagine a Small Town in Which Only Two

question 144

Multiple Choice

Table 16-3
Imagine a small town in which only two residents, Robert and John, own wells that produce water for safe drinking.Each Saturday, Robert and John work together to decide how many litres of water to pump, bring the water to town, and sell it at whatever price the market will bear.To keep things simple, suppose that Robert and John can pump as much water as they want without cost; therefore, the marginal cost of water equals zero.The weekly town demand schedule and total revenue schedule for water are shown in the table. $\begin{array}{|c|c|c|}\hline \text { Weekly quantity (in litres) } & \text { Price (\$) per litre } & \begin{array}{c}\text { Weekly total revenue (and } \\\text { total profit) (\$) }\end{array} \\\hline 0 & 12 & \$ 0 \\\hline 5 & 11 & 55 \\\hline 10 & 10 & 100 \\\hline 15 & 9 & 135 \\\hline 20 & 8 & 160 \\\hline 25 & 7 & 175 \\\hline 30 & 6 & 180 \\\hline 35 & 5 & 175 \\\hline 40 & 4 & 160 \\\hline 45 & 3 & 135 \\\hline 50 & 2 & 100 \\\hline 55 & 1 & 55 \\\hline 60 & 0 & 0 \\\hline\end{array}$
-Refer to Table 16-3.Since Robert and John operate as a profit-maximising monopoly in the market for water, what price will they charge to sell 45 litres of water?

• A)$12
• B)$6
• C)$3
• D)none of the above; the price is arbitrary when dealing with a monopoly market

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