Answered: Imagine a small town in which only two…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 weekly town demand schedule and total revenue schedule for water is shown in the table below:

Quantity (in gallons)	Price	Total Revenue (and Total Profit)
0	$60	$0
100	55	5,500
200	50	10,000
300	45	13,500
400	40	16,000
500	35	17,500
600	30	18,000
700	25	17,500
800	20	16,000
900	15	13,500
1,000	10	10,000
1,100	5	5,500
1,200	0	0

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

Group of answer choices

$30

$40

$60

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Follow-up Question

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 following table:
Quantity
(Gallons)
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
Table 17-1
Price
Refer to Table 17-1. What is the socially efficient quantity of water?
Ca. 600 gallons
Ob. 900 gallons
Oc. 1,200 gallons
Od. 0 gallons
(Dollars per
gallon)
60
55
50
45
40
35
30
25
20
15
10
5
0
Total Revenue and Total
Profit
(Dollars)
0
5,500
10,000
13,500
16,000
17,500
18,000
17,500
16,000
13,500
10,000
5,500
0

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