Imagine a small town in which only two residents, Tony and Jill, own wells that produce safe drinking water. Each week Tony and Jill work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. To keep things simple, suppose that Tony and Jill 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. Weekly Quantity (in gallons) Weekly Total Revenue Price (and Total Profit) $12 $0 10 11 110 20 10 200 30 270 40 320 50 7 350 60 360 70 350 80 4 320 90 3 270 100 200 110 1 110 120 Suppose the town enacts new antitrust laws that prohibit Tony and Jill from operating as a monopolist. What will the new price of water end up being once the Nash equilibrium is reached? Select one: O a. $6 O b. $3 O c. $5 d. $4

Imagine a small town in which only two residents, Tony and Jill, own wells that produce safe drinking water. Each week Tony and Jill work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. To keep things simple, suppose that Tony and Jill 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. Weekly Quantity (in gallons) Weekly Total Revenue Price (and Total Profit) $12 $0 10 11 110 20 10 200 30 270 40 320 50 7 350 60 360 70 350 80 4 320 90 3 270 100 200 110 1 110 120 Suppose the town enacts new antitrust laws that prohibit Tony and Jill from operating as a monopolist. What will the new price of water end up being once the Nash equilibrium is reached? Select one: O a. $6 O b. $3 O c. $5 d. $4

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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