Table 17-1 Imagine a Small Town in Which Only Two Residents,Lisa and Residents,Lisa

question 12

Multiple Choice

Table 17-1
Imagine a small town in which only two residents,Lisa and Mark,own wells that produce safe drinking water.Each week Lisa and Mark work together to decide how many gallons of water to pump.They bring the water to town and sell it at whatever price the market will bear.To keep things simple,suppose that Lisa and Mark 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 is shown in the table below:

-Refer to Table 17-1.If this market for water were perfectly competitive instead of monopolistic,what price would be charged?

• A) $0
• B) $50
• C) $60
• D) $120

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Definitions:

Differential Cost

The difference in cost between two business decisions, focusing on how costs change under different alternatives.

Product Cost Method

A cost-plus method of price setting in which only the costs of manufacturing the product are included in the cost amount to which the markup is added.

Selling Expenses

Expenses that are incurred directly in the selling of merchandise.

Administrative Expenses

Costs related to the general operation of a business, such as salaries of non-sales personnel, rent, office supplies, and utilities.