Table 17-5

question 199

Multiple Choice

Table 17-5. 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 17-5.Since Kunal and Naj operate as a profit-maximizing monopoly in the market for water,what price will they charge for water?

• A) $2
• B) $4
• C) $6
• D) $7

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Definitions:

Market Model

A theoretical construct that describes the functioning of a market, including the roles of buyers and sellers and the determination of prices.

Pure Monopoly

A market structure in which a single seller controls all production of a good or service with no close substitutes, leading to high barriers to entry for other firms.

Imperfect Competition

A market structure in which firms have some control over the price of their products, due to factors like product differentiation, fewer sellers, or barriers to entry.

Standardized Products

Goods or services that have uniform characteristics and quality, regardless of the producer or provider.