Scenario 15-1 Consider the Market for Water in a Small Town in Town

question 127

Multiple Choice

Scenario 15-1
Consider the market for water in a small town in the Old West.Assume that the only source of water is the underground aquifer that lies directly below the town.Wells are used to supply water to the entire town.
-Refer to Scenario 15-1.What happens if only one resident owns all the wells in town

• A)The price of a litre of water will be driven to equal its marginal cost.
• B)The price of a litre of water will exceed its marginal cost.
• C)Because water is a necessity of life, there will be no decline in the quantity of water consumed, regardless of how high the price is raised.
• D)The seller will be able to earn unlimited profit.