Suppose That the Demand Curve for Mineral Water Is Given

question 23

Multiple Choice

Suppose that the demand curve for mineral water is given by p = 50 - 16q, where p is the price per bottle paid by consumers and q is the number of bottles purchased by consumers.Mineral water is supplied to consumers by a monopolistic distributor who buys from a monopolistic producer, who is able to produce mineral water at zero cost.The producer charges the distributor a price of c per bottle.Given his marginal cost of c per unit, the distributor chooses an output to maximize his own profits.Knowing that this is what the distributor will do, the producer sets his price c so as to maximize his revenue.The price paid by consumers under this arrangement is

• A)$3.13.
• B)$12.50.
• C)$37.50.
• D)$25.
• E)$1.56.

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