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

question 27

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.

-Refer to Table 16-3. Suppose the town enacts new anti-trust laws that prohibit Robert and John from operating as a monopolist. What will the new price of water end up being once the Nash equilibrium is reached?

Definitions:

LIFO Reserve

The difference between the cost of inventory calculated under the Last In, First Out (LIFO) method and its cost under the First In, First Out (FIFO) method.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold in a company, including the cost of the materials and labor directly used to create the product.

FIFO Costs

First In, First Out, a cost flow assumption for inventory valuation where the oldest inventory items are recorded as sold first.

FIFO Inventory

A method of inventory valuation where the first items placed into inventory are the first ones sold; stands for First-In, First-Out.