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

question 81

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. How many gallons of water will be produced and sold once Rochelle and Alec reach a Nash equilibrium?

Definitions:

Punitive

Relating to punishment, often referring to punitive damages in legal contexts, which are awarded in addition to actual damages to punish the defendant and deter future misconduct.

Public Policy

Principles and standards considered by the government to be beneficial for the community and used as a guideline for legislative or regulatory actions.

Incidental Damages

Compensation for reasonably associated losses that occur as a direct result of a breach of contract or injury.

Resale Price

The price at which an item is sold again to the public, after being purchased from the original seller.