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

question 87

Multiple Choice

Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec 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 Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The town's weekly demand schedule and total revenue schedule for water is shown in the table below:
-Refer to Table 17-1. Suppose the town enacts new antitrust laws that prohibit Rochelle and Alec from operating as a monopoly. What will be the price of water once Rochelle and Alec reach a Nash equilibrium?

• A)$15
• B)$20
• C)$25
• D)$30

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Definitions:

Specific Contexts

Particular situations or settings in which events occur, influencing the interpretation and significance of those events.

Cultural Contexts

The environmental, social, and cultural settings that affect and shape behaviors, values, practices, and beliefs.

Unevenness

The quality of being not uniform or equal in surface, area, or volume; irregularity.

Mental Modules

Hypothetical structures in the brain proposed to be specialized for processing specific types of information, based on the theory of modularity.